I want to dive into a couple of topics—first, my latest take on gold and silver stocks following the group’s wild ride in recent weeks, and then I’ll end with my take on the market and give you a new leader to put on your watch list.
Let’s start with gold and silver stocks. Below are the charts of the VanEck Gold Miners ETF (GDX) and the Global Miners Silver ETF (SIL)—you can see that, after relatively smooth multi-month uptrends, both have cracked their 50-day moving averages. To me, that says the intermediate-term uptrend is broken.
So how should you respond? Well, that’s what I want to talk about.
If you have a loss or no profit, you should sell—the near-term trend has turned down in my opinion, and it’s likely these stocks have at least a few weeks of base-building ahead.
But what if you have a great profit? Well, there’s nothing wrong with selling out and moving on—the reason we invest is to make money, after all. But when a stock or sector looks like it’s relatively early in a new uptrend (like gold and silver stocks do now) I always try to play things out, giving my winners a chance to turn into even bigger winners.
Thus, if you’ve been riding a gold stock or silver ETF higher for many months, I suggest that you sell some (one-third to one-half your shares), but hold the rest, giving the position room to breathe and build a new launching pad. For the remaining shares, you shouldn’t lose money on them (so if you bought GDX at, say, 25, use a stop near there for the rest of your shares). And if you have a very low cost basis, you could use the long-term 40-week moving average (22.5 and rising) as a potential stop.
All told, I still think gold stocks are in an overall bull market, but after such a big, uninterrupted advance, the odds favor some choppy action (at least) for the next few weeks or even months.
Thus, it makes sense to take some off the table but also consider holding some shares because the longer-term trend remains intact.
As for the overall market, the big-cap indexes have been in a historically tight range lately, but the broad market is pushing ahead—last week saw small- and mid-cap stock indexes reach new highs, and I was very encouraged to see some liquid leaders like Alibaba (BABA), Facebook (FB) and Amazon (AMZN) advance. It’s a good sign that big investors are putting money to work.
Looking at smaller companies, one name I’m watching closely is Nevro (NVRO), which offers a revolutionary new treatment for spinal cord stimulation. Here’s what I wrote about the stock in Cabot Top Ten Trader a couple of weeks back:
“Nevro (with $146 million in revenue during the past 12 months) has a very strong position in a very small market niche, which makes it very attractive. Nevro is a medical device company focused exclusively on an improved neuromodulation treatment for chronic back and leg pain. Using small electrical jolts to the spinal column to block pain signals is a proven technology, but it can produce paresthesia, an unpleasant ‘pins and needles’ sensation like having a limb ‘fall asleep.’ Nevro’s Senza spinal cord stimulation (SCS) system uses its proprietary HF10 therapy system to deliver electrical stimulation at a much higher frequency. The result is better pain management without paresthesia. The SCS market in the U.S. is $1.5 billion, and Nevro is both penetrating the existing market and growing that market as clinical trials prove the efficacy of its technology and more insurers approve it for reimbursement.
“The company gets over a third of its revenue from the U.S. market, but has gained substantial share in Australia, Germany and the U.K., among other international markets. Investors like the three consecutive quarters with triple-digit percentage revenue growth and the estimates of more to come over the next couple of years. Nevro isn’t expected to be profitable until 2018, but investors are already climbing aboard.”
Nevro’s revenue growth has been out of this world (up 241%, 331% and 385% over the past three quarters!), and it’s been trashing estimates consistently as it takes share and as the market expands (mainly because of HF10’s great results).
For exact buy and sell advice on Nevro (and many other new leading stocks of this market advance), definitely give Cabot Top Ten Trader a try. With 235 winning trades to date, you’ll be able to add the market’s strongest stocks to your portfolio. Don’t wait, start profiting today.
P.S. The Market is Headed Much Higher From Here—Buy Now!
Despite the market’s volatility, all of the evidence we’re seeing now suggest that the market is headed much higher in the months to come.
All of Cabot Growth Investor’s key market timing indicators are positive and the buy signal from our “blastoff” indicator tells us that there’s been a sudden, dramatic change for the better in investor perception, which will lead to higher prices.
So now is not the time to sit on the sidelines.