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November 29, 2009 / Jeb

New Gold (NGD) Suffers Major Setback From Cerro San Pedro

It is important as an investor to remain emotionless and not get caught up in panics.  Often the market will show you signs and extraneous one time events shakes out the weak investors.  Many times if you take a step back and wait until a stock resolves itself, this will avoid you getting caught up in fearful panic or optimistic hysteria.

A rule that I practice when unexpected news hits is to see how the stock responds.  If the news is bearish like in our case of the Cerro San Pedro mine  being halted due to environmental concerns then I will look to see how the stock responds.  If the decline is quick and buying resumes that is a sign of strength.  When a stock is able to digest terrible news and resume its up trend this indicates strength and resilience. If it breaks the 3.25 area I would be concerned.

The initial selling panic is a knee jerk reaction which usually shakes out all the weak holders of the trend.  As we can see by the long term chart of New Gold it is still in an uptrend and having the top mining executives on the board will certainly have influence on Mexican officials.

I am sure they will make the adjustments needed at Cerro San Pedro and having a pipeline of great gold copper projects with decreasing cash costs in good mining jurisdictions will overcome this unexpected news item.

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