Every month, investors have a chance to profit from short-term opportunities many don’t know about. I’m talking about trades based on seasonality.
Seasonality has intrigued traders and analysts for decades. It refers to recurring patterns in stock prices that are seen at specific times of the year.
Many are familiar with the “Santa Claus Rally” or the “January Effect.” But fewer consider seasonals around holidays like President’s Day, the Fourth of July and Labor Day.
Seasonality isn’t a new concept. It has been studied extensively in academic literature.
The earliest academic reference to seasonality in the stock market seems to be a 1983 paper, “Year‐End Tax‐Induced Sales and Stock Market Seasonality.” Other research found that other times of the year also offered what academics call “abnormal returns.”
Researchers identified holiday seasonality in a 1994 paper that noted: “The holiday effect is uniquely independent: The magnitude of excess holiday returns is the largest among all seasonal variations.”
That was 29 years ago. Yet, few investors today look to benefit from this “holiday effect” idea that comes several times a year. And that means those of us who do can gain an edge in the market…
Trading Holiday Seasonality
President’s Day falls on the third Monday of February. By that time, traders might believe they have a clearer picture of the market direction for the year, leading to more confident trading decisions.
Retail sales also see a boost during this time, particularly in the auto industry thanks to special financing offers and sales events. This can make the automakers attractive at that time of year.
Then, the Fourth of July comes when trading volumes are generally lower and market volatility can be reduced. Airlines and retailers like Home Depot often see large bounces around this holiday even though the reasons for that aren’t obvious.
By Labor Day, consumers are thinking less about travel and more about back-to-school shopping. Walmart is a stock to consider around this time of year.
Seasonality in the stock market provides an additional layer of information that investors can use to create a diversified portfolio.
But remember — these strategies aren’t buy and hold. They are short-term and require buying on one day and selling a certain number of days later. The exact strategy can vary from holiday to holiday.
The exact signals also vary. Seasonals are important, but they are also just one factor to consider. If the broad stock market is pulling back after a strong rally, the seasonal trend may not be enough to overcome bearish momentum.
That may be why so few traders look at these strategies. Finding and confirming signals requires time.
Investors and analysts may prefer to analyze financial statements instead of the calendar with the limited time they have. Smart investors make time for both research efforts.
I’ve studied seasonality (as well as fundamentals) for years and recently had a breakthrough. I discovered a strategy that makes trading individual stocks from top sectors in their peak profit seasons highly lucrative.
My team and I have invested the last 12 months and more than a $5 million in research… analyzing over 7,000 simulated trades and 20,000 hours of real market data from the last decade … toward the creation of my Apex Profit Calendar.
This tool combines one of my most profitable trading strategies on seasonals with recent innovations in artificial intelligence. It’s an AI-driven system that had the power to turn $10,000 into more than $2 million over the past decade.
I explain exactly how the Apex Profit Calendar works to achieve such results … and share how you can benefit from the 15 Apex Profit Seasons in my presentation here.
Editor, Precision Profits