Louis James

Longtime Daily readers know whenever we want to “deep dive” into gold, we turn to our friends at Casey Research. No other research group knows more about successful natural resources speculation…

From Louis James, senior investment strategist, Casey Research: Here’s how to make volatility your friend: Buy low and sell high.

That’s easier said than done.

To make it work, you have to be a contrarian investor. That means backing up the truck for stuff no one else wants.

It may be a cliché… but it’s true: The best time to buy is when there’s blood in the streets. And the time to sell is when everyone else piles in to the market you knew would go up.

In an ideal world, disciplined contrarians could amass limitless fortunes. All they’d have to do is buy necessary goods after total market meltdowns and sell when the masses pile in.

Unfortunately, these cycles can last 10 or 20 years. That’s well beyond the patience of most investors.

Enter our friend: Market volatility.

Markets are made of masses of individuals, each with his or her own beliefs, fears, and needs. They don’t always make the same decisions, but sometimes large groups fail to value assets accurately.

Frequently, painful experiences cause investors to exit an asset class en masse. This results in an oversold market. That means that the average company in that market is selling for less than it’s worth. The opposite is true in an overbought market.

Such market momentum is, frankly, stupid. But it’s real. And it happens many times within larger mega-cycles. Whenever it appears, it’s an opportunity for contrarians.

But even such intra-cycle momentum can last years.

Enter our next best friend: Extreme volatility.

Most junior miners trade on very little volume. When a company has fewer than 50 million shares outstanding, the stock might trade fewer than 100,000 shares each day. Some companies trade fewer than 10,000 shares a day.

The low volume results in frequent extreme volatility. That creates frequent contrarian opportunities…

It’s gut wrenching until you get used to it. Shares in a solid junior with great management, cash in the bank, and a major new discovery unfolding can drop 20–30% just because a large shareholder facing a margin call is forced to sell. They can also soar 20–30% because of a spectacular drill hole.

If you missed the bottom of the latest mega-cycle, or even the current market momentum trend, don’t worry. The extreme volatility of juniors often creates last-minute buying opportunities for the savvy speculator.

This is great news for investors late to the game. It’s even better news for those who’ve been paying attention and have a shopping list of great stocks ready. There’s always a contrarian opportunity somewhere… we use market volatility—and the pullbacks it brings—as perfect entry points.

Reeves’ Note: Using the “Casey Method,” Louis James found 12 stocks that have already doubled in the new gold bull run. Casey Research ran a back-test and found in December 2008—the last time we saw a gold market like we see today—the Casey Method uncovered 16 stocks. The stocks more than doubled in 12 months, with an average gain of 313%.

One of the Casey Method’s top-recommended stocks is just 60 cents per share and has 200-1,000% potential. “If gold goes into a true mania, you could double or triple those numbers,” Louis James said recently. Click here to see the Casey Method in action.