Conventional wisdom says that once we hit August, summer trading doldrums set in and continue through Labor Day. But is that true? Should we take a break from trading – or should we be even more alert so we can take advantage of opportunities as they appear?
Trying find a theme or trend to trading and investing is common. It’s much easier to follow someone else’s lead on the path to success. As a result, we end up listening to the pundits and experts who do not have our best interests at heart. At this time of year, they tell us to go away and not come back til Labor Day.
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August may be the hottest month of the year and the coldest month for the markets, but that doesn’t mean there are zero trading opportunities. Play the market in front of you while remaining cognizant that things may get dicey this month (due to much lower trading volume). I like to enter each summer trading day with an open mind, use technical analysis to stack the odds in my favor and let the markets tell me what to do.
Summer trading doldrums? Hardly!
If instead you listen to the pundits, you can miss monumental trades that will pay off handsomely. Take Apple as an example. This stock was up strong for 2018 before earnings were announced last week, but it appeared a tech wreck was coming. Many sold this stock down as they believed even good numbers from Apple would be a sale. After all, it’s the summer and what do people do in the summer? They sell.
They turned out completely wrong, as the company ripped higher post earnings. Unloading stock at the very wrong time (or shorting for that matter) would have cost you dearly. It didn’t matter that it was August; it could have been January or May. The point here is to pay attention to the market action and react accordingly.
As for Apple, the world’s first trillion dollar company – it rolls on, as the recent pullback from the highs prior to earnings was a great technical setup. As it usually has been. Summer trading doldrums? Hardly – more like a summer swing.
