There I said it. One of the subscribers to the Trading Lab posted the following chat yesterday "a trading friend has a brother-in-law who always makes the wrong investment decisions. He's like a perfect inverse indicator. He has bet his life on it (Novo Resources) and says he's going to be a millionaire or set for life, etc. I'm hoping he sold on the correction. I would feel better"
Ah, the old brother in law indicator. I believe that stocks, especially junior resource stocks, follow emotional cycles. Take the Novo Resources chart for example:
NVO.V (Daily)
The chart excellently illustrates the increased excitement/participation as the story of the YouTube videos and the potential for 'Wits 2.0' began to spread throughout July and into August.
The peak volume day on August 15th saw price reach as high as C$5.66, and even though price made a marginal new high a few days later at C$5.91 we can say that August 15th was the emotional climax.
Since then NVO shares have been in a wide oscillation waiting for the next catalyst to drive a large directional move. I believe this oscillation can last at least another 3-4 months before a resolution. Support near C$4.50 is important in the short term with the current price action forming what could be construed as a bullish flag pattern. Much bigger support down near C$3.80-C$4.00 is absolutely crucial, however, sub-$4 levels may never be seen again for this stock if bullish catalysts begin to present themselves over the coming weeks/months.
It's also important to remember that while Novo is well known in the junior gold sector, the junior gold sector is a tiny sliver of the overall global financial markets. If the Novo discovery is anywhere near as big as some think the story could capture the animal spirits of a much larger audience. C$6 a share would be a distant memory in such a scenario (think double-digits, big double-digits).
And about that brother in law indicator, even fools get lucky sometimes. Moreover, in the stock market a fool can own the right stock and still end up losing money on it through all sorts of different mistakes (too much leverage, overtrading, etc.).
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.
