I was reading an interesting article on relative value (point in time) investing yesterday, which made a number of general observation that I see being relevant to ROLs spectacular run and series of healthy pull backs.
As we all know ROLs surge higher has been very fast but now it has been punctuated by 2 recent pullbacks of around 33% and 23% that have rebalanced sentiment.
Such two-steps-forward-one-step-back behaviour is normal and expected in even the strongest bull-market advances. It is suggested these periodic pullbacks are a critical mechanism that keeps popular greed in check. If greed gets out of hand too soon, it will burn itself out and prematurely kill the upleg. All traders interested in buying soon will be sucked in, leaving no new near-term buyers. At that point the upleg fails.
Will the next leg up see $3.50?
Hope the above is of some general interest.
Cheers
D
2 steps forward 1 step back
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