Checking in on a Runner

In Speculation Case Study: Chasing a Mining Discovery Breakout I briefly discussed the simple strategy of chasing a breakout story. Very simply, the market doesn't price in the good news right away. Short-term there can be a decent upside in a bull market. Long-term, you're hoping for a "the hits keep on coming" situation that turns into a multi-bagger.

The stock I chased at the end of May was Northstar Gold (NSG) on the TSVX and NSGCF on the OTCBB. They had a "stellar" hole going by Durrent's shorthand drill ranking that I posted on The Hits Keep on Coming.

Drill results will decide if this becomes a bigger breakout or it experiences conslidation. The spike today tells me speculators are betting on good results coming (bad for the stock if it doesn't happen) or somebody knows something...

Speculation Case Study: Chasing a Mining Discovery Breakout

If you're quick, one speculations strategy is to chase discovery breakouts. These do not always pan out, but often times the market doesn't fully price in a big discovery right away. Momentum is a strategy not simply because of human psychology, but because investors usually do not accurately price in all available information right away. With topping/declining stocks, they take the initial bad news as a one-off. With positive changes, they view teh good news in isolation.

For traders more on the daytrading end of the spectrum, a good drill result can produce several days of substantial gains. I will usually buy these as fast as possible and not worry about pullbacks. I won't do any research beyond checking if the result is overhyped.

Here's an example that I bought last week on news: Northstar.

I bought slightly below the horizontal on the first day of the breakout. As long as it stays above, I will see what the news flow brings.

In this case, the hit doesn't seem as good as the market's reaction, but what intrigues me is the company has employed GoldSpot (my top holding). The latter found eight drilling targets for Northstar on the property they're currently drilling. If I'm right about GoldSpot's technology, then companies using it should experience better than average drill results. On net, speculative trades should pay off more than they lose in a bull market.