A Rod and Reel For Subscribers, by Rick Ackerman

October 10th, 2006 Price: Subscribe »

Published Daily

ARCHIVED COMMENTARY

A Rod and Reel
For Subscribers

For edition of May 04, 2006

(Click on chart to enlarge)

We bought some shares in Golden Star Resources at the intraday low, acting on a query from a subscriber during yesterday’s weekly Q&A session. It was a question from another gold trader, however, that got me stirred up. I have reprinted it below, along with my response, since it goes to the heart of what Rick’s Picks is about:

“I had great success on your last [Comex Gold] trade of a break above a certain price level, which you admit you don’t often do," writes Roger Hooper. "Since then, you have mentioned a number of important price levels for June Gold that became ‘chopped liver' [as you like to say], but in each case you never gave a specific suggestion to trade the breakout. Hindsight makes me wonder if you were implying that one could have traded the breakout with a tight stop, but I don’t like to assume you were implying anything without a clear statement first. For future reference, do these resistance levels represent breakout trades that we could try, or should we only think that if you make a specific mention of one? If they are potential trades, what is the general stop we should place under these breakout levels?"

My response:

Unless I am very specific about entry points and stops, it is my intention that subscribers follow their own muse when attempting to trade my numbers. I provide targets that are almost invariably reached, often very precisely, and trend forecasts that are correct about 88 percent of the time. This is what I am best at, and my forecasts are meant to give you the confidence to trade a particular stock or commodity in accordance with your own style and rules.

In June Gold, for instance, my "ironclad" target at 709.50 should suffice to keep you on the right side of bullion, whether for purposes of establishing a position, taking profits, or even getting short at certain times. I have shunned the role of gold cheerleader so that I can focus on the bull market one rally target at a time. In this respect, I think I have served you well – better perhaps, than those who simply say, “Gold is going to $10,000, and that is that.”

Managing Risk

You've probably heard it said that finding the perfect entry point is less important to the goal of profiting than managing the risk of a trade along the way. Well, this is a very important concept, and it explains why I would rather provide a subscriber with a rod and reel than with a caught fish. It is only half-jokingly that I have said here before that many Rick's Picks subscribers can probably trade circles around me. You can see for yourself that, all too often, I use stops that are too tight, causing me to miss very tradable highs and lows by a relatively small margin. But I LOVE hearing from subscribers who have used my pivots imaginatively and with that little bit of daring that I lack. If you trust my numbers, it is but a small step to trust yourself to use them in a disciplined way that can make you money.

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A Bear Market Tripwire

Why get all worked up speculating about the onset of the Mother of All Bears when we possess technical tools that will warn us when this has occurred? Here’s a simple alert that I believe will serve us well, as outlined in my current trading strategy for the Diamonds: “If the Diamonds fall below 109.27 without having first touched 115.33, you can be fairly certain that Mother Bear has arrived.” Jot that number down, for sure.

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Iran and the Dollar

The first Amernick Letter we’ve received in a while came out yesterday afternoon, reminding us of how much we’ve missed its insightful global perspective. The editor, Larry Amernick, has usually imbibed and distilled more world news by 6 a.m. each morning than most of us get in a whole month.

With his kind permission, here is an excerpt from the latest issue, which runs to seventeen pages, including some eye-popping charts. In the newsletter world, Larry’s service works out to be one of the great bargains, since a quarterly subscription costs only $69. It’s like getting regular CIA briefings for just pennies a day. For further details, simply click here. Now to the excerpt:

The recent rally in the euro is due to the anticipation of the introduction of the new Iran Oil Bourse. The new oil exchange was scheduled to start trading oil in euros in late March, but the government delayed its opening.

“Doom-and-Gloomers” forecast that the introduction of the new Bourse would wreak havoc on dollar denominated assets as European banks increased their euro holdings to petroleum on the new bourse. In most of the global future’s exchanges, oil is priced in dollars.

To the Iranian government, the new oil exchange is just another weapon aimed at the United States. Poor George Bush! Faced with his lowest approval in the polls, he still must galvanize the nation against an imminent threat.

Iran is being silently backed by both Russia and China. Russia, gorging on oil and gold revenues, is flexing its muscles anew.

In an article in “Rossiiskaya Gazeta”, former Soviet Premier Gorbachev warned of a new cold War between the U.S. and Russia. Gorbachev said, “We have not yet left the past behind. Its death grip can be felt everywhere.”

Jingoism

Jingoism is the order of the day.

Fyodor Lukyanov, the editor of the journal “Russia in Global Affairs”, airs these feelings when he stated, “You get the impression Russia is getting stronger before your eyes and that it…can pay a lot less heed to the reaction of Western partners than it did before. It’s not us, that need the rest of the world, it is them that needs us!”

China, needing stable energy resources for its rapidly expanding economy, is quietly backing Iran’s bellicosity by threatening to cast a veto on any United Nation’s Security Council sanctions on Iran.

The United States, poorly led by President Bush and poorly advised by Secretary of State Condoleeza Rice, faces difficult choices in a very new and complex landscape. The American public, pummeled by rising commodity prices, illegal immigration threats, and a shrinking middle class, do not have a leadership offering clear policy choices.

Germany Cuts Loose

Our NATO allies, sensing political weakness on our side of the Atlantic, are quietly making deals with Russia and Iran. Last week, German Chancellor Merkel signed a pipeline deal with President Putin of Russia in Tomsk. Tomsk is the home of Yukos, the recently nationalized Russian oil company.

By signing the deal, Chancellor Merkel betrayed her Polish neighbors to the east, and her French, Spanish, Dutch and Belgium neighbors to her west. Merkel succeeded in securing needed natural gas for her own people, but ignored the concerns of her European Union and American allies.

Before the summit started, President Putin warned Germany that if it did not sign a deal to build the natural gas pipeline, it would look for better customers in Asia.

Ancient Enemies

The Poles feel squeezed between their two ancient enemies. The pipeline will be laid under the Baltic Sea between a Russian and German port. It will bypass Poland and the Baltic states. Among the agreements signed at Tomsk was a pledge by Putin to pay in full the $29.8 billion in debt to the Paris Club.

By working bilaterally with Russia, Germany invited the Russians to pick apart the EU and make lucrative individual energy treaties with each of the European nations.

There was little written about this in either London or Paris. Both countries are dealing with internal political scandals. At the same time, Russia and Germany were making this deal, U.S. Secretary of State Condoleeza Rice was in Sofia, Bulgaria addressing a meeting of NATO heads about the importance of maintaining a strong alliance.

Turks Reject Condie

In her “real-politic” view, Secretary Rice attempted to gain the use of Turkish air bases if the U.S. needs to attack Iran’s nuclear facilities. Of course, the sacrificial offering was the Kurds. Kurdish leaders reported that Turkish troops violated the Turkish Iraqi border. The U.S. remained mum on the reports.

The Turks turned downed the Americans, but they may be bargaining for a greater say in the Kurdish part of Iraq.

Overall, secretary Rice has turned out to be one of the worst Secretary of States the U.S. has ever had! Who was worse? Madeleine Albright surpassed Rice, but not by much.

Currently, the U.S. has a muddled foreign policy in dealing with both its allies and adversaries. The recent steep rise in the price of Gold and the fall of the dollar are a direct response to perceived weakness in the American position.

President Bush may attempt to reverse his fortunes by attacking Iran before June 15th. The Iranians are supposed to install a new air defense system by then.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com