#169. Gold Investment And Tetrahedron Update 11

Create Extra Grams From This Cut Loss Strategy
Previously from November 2008 till February 2009 we have seen a great bull run in gold price. The uptrend (line C) didn't break until recently in March 2009.

We are now in what seems like a downtrend channel between line A and B. Price might move within this channel for the time being with the immediate USD850 in sight. If we don't break above line B, we might see price trending lower in the next month or so.

What strategy to use in this downtrend?

I was having a discussion with my friend and came up with an idea. Since some of you have bought at a high price and now still holding to it, this strategy might be an alternative.

From the chart, you can see that the price is now in the middle of the downtrend channel. It might go down touching line A or go up touching line B. I am hoping it goes up touching line B. But I am not so sure if we will see it breaking above line B.

If that's the case, say if it reaches line B, I am going to sell my holding. And when it then moves down to line A, I will buy it back again.

Example, when it touches line B at USD915, I will sell it. In Public Bank price, this might be around say RM104.62 (Bank's buying price). Say I sell 100 gms, I will get back RM10,462.

I will then buy back when the price goes down lower touching line A. Possibly at USD830-850 range. That would probably be at RM99.03 to RM101.42 range (Bank's selling price). In this case, with RM10,462, I can buy back around 105 or 103 gms.

What it means is that I now have created an extra 3 or 5 gms versus the original 100 gms.

Nevertheless, this is just a theory. And it all really depends on the actual timing and price that we buy and sell.

I guess this is a good reason why we have to put a stop loss when things really go south and sour.

Also, another bright side is since we have bought at RM99.03 or RM101.42, it's a lower price now. And easier for us to recoup and make a profit when price starts to move upwards again. From my record of Public Bank price, I remember seeing the price went up as high as RM115 (Bank's buying price) during the February 20th bull run of USD1,000.

What's your thought and comment on this strategy? I guess this is a way we can play 'short' (sell at high price, and buy back at low price).