The major indexes do not have strong seasonal patterns right now. This is not surprising since a quarterly earnings season will be starting with Alcoa's release at today's close. Institutional traders know it is higher risk to enter a new position just before a company releases their earnings – especially at this time of year because many companies will be announcing full year results.
But there is one sector that does have a strong seasonal pattern right now – the oil-related stocks. For example, over the next 15 weeks, OIH, the Market Vectors Oil Services ETF traded on the NYSE, has gained an average 10.9% over the next 15 weeks, with gains in every year of its history.
The largest holding of OIH, at nearly 20%, is Schlumberger Ltd (SLB), the oil services company. We can see how OIH got its seasonality by looking at SLB's track record. Over 31 years, this company has had just 5 losses over the next 16 weeks:
In the past this has been a good time of year to buy Schlumberger stock. But with the recent collapse of oil prices, does it make sense to buy SLB right now? Many analysts are saying long-term lows may be forming in the oil stocks. Is it too early to take a chance?
SLB's monthly chart shows it has retreated to a long-term trendline:
The Consensus Price Target for SLB is 120.40, 48% higher than the current price.
A good reward-to-risk trade could be entered here. An 8% stop-loss would place an exit point at just below the 75 level, which may be a support level. With a possible upside of 120, the reward-to-risk ratio works out to 4.8, a pretty good ratio.
But if oil prices stay low, will Schlumberger's stock suffer as well? One director of the company has faith they will continue to do well. On October 27, he bought 3,250 shares at $92.59 ($300,917.50 total).
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2015 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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