Tuesday, March 16, 2010

A Cautionary Tale Worth Reading

It's about exciting E-mails containing hot tips in gold stocks. Brad Ziglar of HardAssetsInvestor.com received one about Guinness Exploration, whose price action was nice on the day he received it. But, a double check using its "money flow" - an indicator that multiplies volume by price change and keeps a running total - showed that money was on balance exiting from the stock. That tipped Ziglar off about some softness in the rally. As the first graph of his Seeking Alpha article shows, the price of Guinness did decline subsequently.

On the other hand, the money-flow tally shows higher highs and higher lows for the SPDR Gold trust (GLD.)


It isn't always easy to ignore E-mails with hot tips, but Ziglar has shown a metric that can be used as an aid in doing so. Of course, the "delete" button works too....

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