Strategic Resources, LTD.(fka SGCR)

[Hilander]

WHEN TO SELL-PATIENCE, PATIENCE, PATIENCE

There's a lot of research written about selling, These Articles & Notes are from my Trading Journal.

I have compiled this in three parts to break up the information into bite size portions so it can be digested easily.


Part 1:
Bill Panetta’s 50% rule: http://www.esignalcentral.com/exchange/05_2006/third_party_spotlight.asp

http://www.trade10.com/Elliot_Wave.html

Watch The Hammer Affect:
http://www.investopedia.com/terms/h/hammer.asp

ARTICLE:
When to Sell a Stock?
By: Mike Hoy
March 30, 2006
http://www.gold-eagle.com/editorials_05/hoy033006.html
http://www.gold-eagle.com/research/hoyndx.html

The first biggest mistake is deciding to sell stocks at prices that will prove to be pennies on the dollar before they reach their ultimate bull market highs.

First, start with the management of each company. There is no such thing as a “good investment” without a capable management team to get the job done. I do not even consider an investment if I am not comfortable with management.

Second, look at the business plan. I must know where management proposes to take the company and how they hope to get there. If management has a solid business plan then determine how long it will take for the company to accomplish their goals. It is important to remember why we made the decision to make the investment in the first place.

DECIDING WHEN TO SELL!
In a bull market practically all stocks rise in the sectors benefiting from the favorable market conditions. The key to wealth is knowing which stocks to take profits from and which ones to hold as core positions. Corrections and consolidations give opportunities to build positions. I always get a charge from people who seem to think that just because a stock rises in value an investor has to take a profit so as not to lose what he has made on paper. I liken this to my days as a broker, years ago, when I saw time and time again how investors were very easily encouraged to take a profit and reinvest the proceeds into a position that was underwater. I too was guilty of doing this as I felt it was the right thing to do. Time and experience has proven the error of this type of thinking. In practically all cases it was the losing stock position that should have been sold with the proceeds used to buy more of the winning stock. Often investors will take a profit from one company to purchase an investment in a new company. I have never been able to understand how this logic is supposed to lessen an investor’s risk when the capital is reinvested in a new venture. Seems to me the investor is starting the risk all over again.

In my three favorite companies my money has more than doubled in one and tripled in the other and up more than tenfold, on my initial investment, in the third. Once an investor sees returns of this nature on the stocks in their portfolio they will then have the confidence to not worry about the day to day price volatility in their portfolios. This type of attitude can very easily be adopted when one is in a bull market in the sectors that you own. As time moves forward I am automatically checking the progress of my investments with the business plans that the management of my investments have laid out for them to accomplish. If I find that management is successfully moving my investments towards a final goal, which inevitably is proving up an ore body or putting an already proven ore body into production, then I am a happy camper and I will continue to own and build positions in my investments. Most investors do not realize that the companies they own could be considered more undervalued at two or three times their purchase price as management successfully delivers on their business plans. This is where the boys are separated from the men. Being able to understand true value from building a company from the ground floor up versus a stock that simply has a very good marketing team telling a good story is the key in knowing when to take a profit versus owning a stock as a core holding. In the three stocks I referred to I am very happy to say that I have added to my positions as management has proved up additional value to the companies. I have taken money from companies whose management failed to deliver and used that as the additional funds to build my winning positions.

IMO, the reason I have been drawn to making investments in start up junior mining and natural resource companies deal directly with the rewards of finding the company with a resource that becomes a positive cash flowing mine. I know that very few companies have bodies of ore that will ever see the day when they will be called a producing mine. The odds are stacked against every junior mining company ever becoming classified as a successful producing company. However, the rewards of being successful in finding a junior that is bought out or becomes a producing company far outweigh the risk associated with making the investment. Huge profits and returns await those who are successful and patient.

The ironic part to this story deals with companies that may falter in being able to timely deliver on their business plans. There are many reasons why a company may fall behind; some of these reasons are totally acceptable as being normal in the mining industry. In cases like this positions should be built to take long term advantage over a short term holdup. The “boys” also get separated at this point as many times these failures are warning signs that something is not right. I like to refer to these failures as “Material Changes.” Time always separates fact from fiction. A shrewd investor can recognize material changes as time brings the truth out of fiction. As time reveals that management has made mistakes, overestimated ore bodies, underestimated costs, fudged the truth about what they hoped to have, or simply did not have a clue what they originally hoped to accomplish in the first place; there is consolation in knowing that all is not lost. In a bull market there is a strong possibility that good money can still be made when an individual owns a company like this. Remember a rising tide will lift all boats. Knowing that “all is not well” is the first step in knowing that this company is on its way out of my portfolio. I will make sure I liquidate companies of this nature as they move up in price and liquidity offers a timely exit. I get a charge out of being able to make money on companies that deserve to be liquidated at a loss. Have you ever noticed that stocks offer excellent liquidity to sell as they move higher in price? The important point to make here is; if you decide to sell a stock out of your portfolio do it when liquidity gives you the opportunity to do so not when your emotions stir you to sell.

THREE SECRETS;
The three secrets to making big money in the markets are:
1) Accumulating good quality stocks or stocks that have great potential when no one wants them
2) Being able to let loose of the stocks that encounter material changes when they rise and liquidity offers the opportunity to delete them from your portfolio
3) Knowing which stocks should be considered core holdings where weakness should be viewed as an opportunity to build positions at a discount

CONCLUSION:
Like I have said, knowing when to sell a stock can be very complicated. Ultimately my decisions to sell are based on the accomplishments of management in being able to deliver value to their shareholders. By holding my core positions I put myself in a position to minimize my taxes and pay long term capital gains when I do decide to take profits down the road.


Part 2:

Advanced Commodity Trading Techniques:
THE MANUAL (Out of Print)
By Ted Warren

Every trader is responsible for his own actions. If you trade from these notes you accept full responsibility for your actions. Do your own due diligence.

Warren’s Trading Techniques came from his writings and experiences documented during the 1930’s through 1950’s. I like his techniques because they are simple.

Notes:
• Sought markets that were just ending a lengthy accumulation base. Got in when the chart gave him the right signal.
• Warren’s not interested in short term trading, too risky. Don’t have the temperament.
• Worst enemy is emotions. Fear of missing a move was primarily the worst weakness, causing one to get into the market too often.
• Soon became apparent, the importance of manipulation in the market and the psychology of the public which is the basis for interpreting future actions of the market.
• The public will sell at any price when they are scared or when they are pressed by margin calls or for many normal reasons when they are in dire need of cash.
• Charts: Pay attention to head and shoulder bottoms.
• It’s from lengthy low areas that many of the profitable large moves start.
• Only buy high after a proper formation such as a triangle, especially a flat-topped triangle or a long consolidation period of many weeks.
• If your lucky enough to have a bottom or a good formation show up once a year, play it heavily by buying on a scale-up during the early part of the move.
• Playing the small and intermediate moves is what kills you.
• “It is difficult to describe tops in the futures markets. They are almost always made up of violent action. That is the time to sell. But, the very largest moves will have violent trading actions with its shakeouts before the top is made. Sometimes there may be two tops, months apart. There are so many variations. I have sold on the top range, but rarely. Once, I sold rye on a top day purely by accident because I stubbornly held on for a long term capital gain in 1951. I realized previously that the insiders, with their huge profits must try to convert them into long-term capital gains as much as possible. Because of this reasoning I was able to hold on with confidence.”
• Because tops are usually so violent and can so seldom be picked with any degree of accuracy, I advise against trying to sell short.
• Pyramiding: After having bought about one-third of your purchasing ability within the latter part of a head and shoulders bottom during an accumulation or consolidation triangle, you should buy another one-third as it breaks out on the upside. Then after this when it has a reaction, place a stop buy for the other third above the last high. You now have a cushion of profit to help keep you from sweating. As the markup stage continues at a moderate pace with normal setbacks, after each advance into new high ground you can use your paper profits to buy more by placing stop buys above recent highs during a setback. It is very common during this early markup stage for a commodity to form a nearly perfect trend line. As momentum is gathered there may suddenly be a one-day fast rise followed by a sharp setback almost as quickly giving a weak appearance as if it has gone too high. Don’t let it fool you. It’s meant to look this way. You and others are considered to be excess baggage. This was meant to dump you overboard and to discourage buying. Normally after this shakeout with the price recovering to near the recent highs, you can buy more with your paper profits if you wish and move your stop sells to below the recent low. Remember if you have a long base behind this move you can expect a large rise. After the next fast rise, if it continues to “boil” on the upside, it may be in a top area. From here on, you are on your own. This first violent action may be the tip or it may not be. I have seen tips that appeared to be obvious but sold long before because I had misinterpreted a previous action as a tip. You may wait with patience to pick a strong appearing bottom but when you are in, you are under pressure to pick a selling spot and there comes a time when time is short.

It is important to keep and study old charts to learn to anticipate future action by studying past actions. If their wasnt excess speculation, there would only be moderate price changes.
• Hedging is selling short against commodities in trade and storage. Without speculators there could not be any hedging. Why not make use of the gullible public to absorb the risks involved by wide swings in prices!
• Strange as it seems, after all the know how one will seem to have acquired, nearly every right decision made will turn out to be at the wrong time. When a purchase was made, wasn’t everybody else buying? Obviously, it had to go up. It did but not much. All the bullish news indicated it would go much higher. What went wrong? Simply that too many traders had the same opinion.
• One can afford to plunge with a minimum of risk in the head and shoulders or triangles of long duration.
• Beware of trying for the intermediate moves.
• In the last 16 days of action, I could recognize how the manipulations in the triangle affected the average trader. I could see the internal forces that were being built up. From the trader’s viewpoint, it was obvious the rise could not continue going up. The trader does not understand that when it is obvious to him it is also obvious to the majority. Except for temporary periods, the majority is always wrong because the insiders are on the opposing side, just like a contest. They know what they are doing and have the power to do it.
• Chartist: Study the charts carefully. When I don’t have a positive appearing formation to back up my opinion, I seem to get frightened too easily.
• It’s far better to buy in at as safe a manner as possible. If I can buy into a slow rise that confirms my opinion from a sound base, I will acquire a cushion of profit against an early shakeout. There are no signs for the average fundamentalist to foresee the big move ahead except from what I can extract from the charts. Keep studying the charts.

Another Book By Warren-1966, 1993, 1994, 1995, 1998:
How To Make The Stock Market Make Money For You by Ted Warren
http://www.4starbooks.com/product.php?productid=16382&cat=0&page=1

http://www.amazon.com/s/ref=nb_ss_b/102-4904825-9405732?url=search-alias%3Dstripbooks&field-keyw....




STRATEGY:
Everyone develops their own style of trading. Here’s two I find interesting.
• I like buying at least 100,000 shares minimum at a time. I figure if a stock is worth owning, that’s what I start out with and go from there.
• Any individual stock is down 90% and only up roughly 10% of the time.
• I trust the charts. Keep a close eye on them.
• The price and volume patterns are the most important things to monitor.

Here’s a friends Trading Strategy:
• Never invest in anything when you do not really understand what the company does.
• Be careful when investing in companies that are under 5 years old.


Part 3:

Two Friends Recommended these two books:
Technical Analysis of the Financial Markets by John J. Murphy
http://worldcat.org/wcpa/oclc/39615008
New York Institute of Finance - A comprehensive guide to trading methods and
applications. Its like a bible for any chartist - 542 pages.
IMO, it’s the best Technical Analysis book for learning the fundamentals.

&

Technical Analysis of the Futures Market by: John J. Murphy
A Comprehensive Guide to Trading Methods and Applications
NEW YORK INSTITUTE OF FINANCE -A Prentice-Hall Company -