It has often been said that investment returns are the outcome of “time in the market”, not “timing of the market”. Stockbrokers may not be able to offer clients such advice, but when you think about it, timing of the market is the most important consideration of all, to stay profitable.
In spite of much criticism of technical analysis, it is the only tool to offer guidance as to when to sell, to minimize loss of capital.
The price of Gold peaked at $1921 in September 2011 after rising from less than $1000, before easing lower in a gentle downtrend. Alert investors might have safely exited at this time, even although gold trading appeared to be within a stable range.The collapse in the price came suddenly on Friday April 12 and Monday April 15, 2013, when support at $1550 failed to hold. There was a $230 fall or 15% to reach a low of $1334.
It was unexpected and inexplicable for most investors, but not George Soros. He fore-saw the danger of the gold price way above its historic levels and took evasive action, cutting his holding in the SPDR gold fund ETF by 55%, and helping to trigger the collapse. The last straw was a “sell” signal by Goldman Sachs a week before the stampede to exit.
The fall of the share-price below a long-term support level is often the first warning of impending disaster, and is the best time to exit. This was the case when the share-price of Santos fell below $11.50 in the week of 10/10/2014, subsequently collapsing to be $3.52 at the last close a year later.