What is the character weakness, or the pitfall in thinking, that is responsible for investors who know better, not following their own planned strategy, and ignoring a stop/loss signal?
It is not a fault in technical analysis that is responsible. Rather it reflects the difficulty of maintaining focus at all times, when market conditions demand careful thought and response. If we fail to respond to the first news of adverse trading conditions, it will be easier for us to ignore subsequent, perhaps more urgent warnings that our position is under threat.
A post published on February 10, 2013 suggested that Newcrest’s share-price was undergoing a reversal in trend.
Although a new trend appeared to be forming on the daily chart, the Newcrest share-price was still on a slippery down-ward slope on the weekly chart. A wiser assessment would have taken into account the severity of the profit decline, at a time when the price of gold was so high ($1672 at the time).
As is often the case, bad news often dribbles out as the real extent of trading woes becomes apparent and the share-price starts to decline.
There is no excuse for losing focus, and failing to act promptly on one’s stop/loss position ($23 ).
As so-often is the case, break-out was dramatic. A $3 fall from $22 to $19 on March 28 gave one no chance to escape.
Instead of cutting my losses, I held on in hope of a rebound to exit. This did not happen and instead the situation deteriorated with a catastrophic fall in the price of gold on April 12 and April 14.
Further support levels at $18.50 and $16 have now been broken. The next are at $14 and then $10.
With the price of gold still falling, further falls are likely.
Will I sell now? I should do so – belatedly. But will I?
- Australia / Mining / Newcrest axes jobs (jobmarketmonitor.com)
- Newcrest Mining Limited – Quarterly Report for the three months ending 31 March 2013 (prnewswire.com)
- Newcrest reviews mines after gold slump (bigpondnews.com)
- What’s going on at Newcrest part 2 (blogs.abc.net.au)