Thinking About Seasonal Patterns for Trending Stocks

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It is important to consider whether a specific equity is in an uptrend or downtrend.  In the event of an uptrend, you would naturally expect the likelihood of identifying a long (seasonal) trade to be much higher since the stock has been moving in the same direction for several years in a row. When doing due diligence, check to see if a stock has been trending.  Take a look at PCLN which rallies every February:

An enormous uptrend.

When looking at time series data, it is decomposed into the following:

1. Trend
2. Seasonal
3. Cyclical
4. Irregular

Priceline has benefited greatly from trend. As a result, it is not surprising to see the above seasonal pattern with an average move of 26.8% over 77 days.  Be careful with these trade candidates, in many cases when a major trend breaks the seasonal component has a good chance of disappearing also. Stay smart and trade safe!