Understand How The Pieces Move

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I charted BAA last week as a potential breakout play, only to see it (along with the rest of the miners) lose ground and pull back from resistance. Just because a stock fails to initially break out, though, does not mean you should take it off your watchlist and chalk it up as a mistake for monitoring it in the first place. Instead, it is usually correct to continue to stalk the stock to see if it simply needed more time to consolidate before breaking out, as opposed to declaring it destitute. This is precisely the type of mental process of “making adjustments” that I described here and here. I am always seeking to refine a thesis when I believe it to be appropriate, as opposed to making a broad claim and sticking with it no matter what.

Fast forward a week later, and BAA is suddenly stabilizing again with the rest of the miners. Indeed, just because Banro failed to break out last week does not mean it is a loser. Just as one bad trade does not define a good trader who uses position sizing and loss- cutting techniques, one failed breakout should not define a stock that is still threatening to go much higher. Since refining my thesis last night that I expect the precious metals miners to outperform the metals themselves over the next few months, I am even more inclined to continue to stalk Banro for a bonafide breakout.

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