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Seasonal Investing: How to Time the Stock Market for Best Performance

03 Jan Seasonal Investing: How to Time the Stock Market for Best Performance

In early December last year, I hosted a workshop on teaching people how to invest according to seasonality. It’s an approach called Seasonal Investing and it helps people make money in the Financial Markets by looking for regular and predictable changes which recur every calendar year.What I teach is for investors and traders to look for repeatable patterns based on time periods and events. A simple example that we just experienced during the holidays was how busy the retail stores (online or offline) were. The reason was of course people looking for and buying Christmas gifts for their loved ones.

For example, Amazon.com and Wal-Mart did very well during the holiday season. In fact, Amazon’s stock price reached a record high of $696 on Dec 29.

amzn

AMAZON.COM (AMZN) CHART

So now that we are at the start of 2016, what’s the next seasonality play? Well… let’s stick with the Retail sector. We typically see a strong retail sector from October to December. Now that the Christmas shopping season is over, its time to bet against this sector and potentially profit on the downside. For those experienced traders, we’re going to look to short the sector through ETF’s and/or companies such as Amazon.com or even credit card companies such as Visa/Mastercard.

Let’s take a look at history to see how the US Retail Sector ETF (XRT) performed in the past.

xrt
You can see it follows the seasonally weak retail sector from January to February and then it becomes a seasonally strong sector from October to December.

 Could we potentially see some potential SHORT SETUPS in the following stocks?

visa

 

VISA CHART (V) 

bby
BEST BUY CHART (BBY) 

Its your call. What other retail company stock prices can potentially show weakness in Jan and Feb? Shorting stocks is very risky as the stock prices can go against you. Please ensure that you have a stop loss order on every trade. 

DISCLAIMER: We do not hold any LONG or SHORT positions in the companies mentioned.

 

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