By Adam Hamilton – Re-Blogged From http://www.Zealllc.com
The gold miners’ stocks are suffering from universal and overwhelming bearishness today, with nearly everyone expecting further selling. That’s the natural reaction following this sector’s recent massive correction, which climaxed in one of its biggest daily plummets ever witnessed. But within bull markets, there’s no better time to buy aggressively than deep in a major selloff that’s riddled with great doubt and fear.
The core mission of speculation and investment is so simple even children can easily grasp it, buy low sell high. The great challenges arise not from understanding, but execution. Actually buying low then selling high in real markets is exceedingly unnatural and uncomfortable. It requires traders to overcome their own greed and fear to do the exact opposite of everything their own instincts are screaming to do.
The only times speculators and investors want to buy aggressively is when it feels great to do so. That only happens late in powerful rallies, when everyone can clearly see how strong a sector’s performance has been. Traders then commit one of trading’s cardinal sins, extrapolating recent performance out into the indefinite future. They assume a red-hot sector will keep on rising, and eagerly rush to buy high after a rally.