The Market has Seasons

Hey 5-Star Trader,

For this week’s Tuesday Trade, I want to check in with you and go over the recent macros of the market, along with a trade I took with Microsoft (MSFT).

Just like the weather, the market has seasons, and though we can count on these seasons to change, I think this is one of the most difficult aspects for new traders to grasp. Why? It seems that once you get used to one market condition (for example, the money printing days of early January), Mr. Market likes to show you who is boss.

The best (and really only) way to get around this, is to know the market works in seasons, just like the weather. Just like you can’t expect to visit the pool in Seattle during January, you can’t expect to multiply your options account when the market is chopping back and forth. It’s the hard and fast truth. But, the great part about knowing that the market has seasons, is recognizing what each one looks like, and how to trade it. Right now, the upcoming season is heating up. Yesterday, the Nasdaq closed above the 50 SMA on a daily chart, in a confirmation move higher after what has been a lackluster 2021 for the modern-day industrials. And, it was almost right on schedule. Why? We have entered the 21-day time frame prior to earnings, otherwise known as the hot zone, in many key technology names. It’s during this time frame that historically, and seasonally, they move higher – in an anticipation of solid earnings reports that are soon to come. 

So, we know we are into the ‘run into earnings season, but which tickers should you pick? For me, they work best when they are strong companies, backed by solid fundamentals along with technical patterns. These trades work even better when they are in a hyped-up industry group, a particularly strong sector, or have smashed expectations the past few quarters.

Microsoft (MSFT) and the trade in $250 is a prime example of a ticker that is following this pattern. I entered a trade in MSFT in anticipation of it entering the Hot Zone, as it also had a daily and weekly squeeze, and I didn’t want to miss to move. Check out the charts below. In the first image, you can see the Nasdaq finally breaking out above the key resistance it’s been under since back in February. Microsoft was one of the core tickers that lead this charge higher. It broke out on good news, but, (not coincidentally) during the 21-day time frame prior to earnings.

In this instance, I got in a bit early, but that early entry allowed me and my Mastery members to take profits on this breakout move.

Other tickers I have my eye on are Sonos (SONO), Netflix (NFLX), Amazon (AMZN), Tesla (TSLA), Qualcomm (QCOM), Spotify (SPOT), and more.

 

While right now these names look good to me, it’s always important to remember that we can only trade what the market will give us and that the market is different in different seasons. Right now, we are entering a season of historical momentum, and that momentum trades higher going into earnings reports. Be on the lookout, and let me know if you’re trading a ticker entering the Hot Zone.

 

If you want to learn more about this setup, check out my free webinar. I’ll be hosting it this Wednesday at 7:00 p.m. Central. 

Leave a Comment

Up Next...

Trade Review: Using a Neutral 0 DTE SPX Strategy

  In today’s Trade Review episode, I cover a quick SPX 0 DTE trade from last Friday at market close. In this video review, I cover: Why I decided to make a bet that the market would trade sideways into the close How I analyzed the options chain and technical chart patterns Why I decided … Read more

Read More

Butterflies + Put Credit Spreads Combined

A Bullish Earnings Call Last week, in the trading room, one of our members requested that I analyze the ticker AAP. This ticker belongs to Applovin, a company I’ve never traded before. This find is a prime example of the collaborative aspect of the trading room, and it’s why I appreciate our dedicated traders so … Read more

Read More

Walmart: Earnings in Focus

Walmart Earnings: May 16th Walmart is reporting earnings on Thursday, May 16th, before the bell. This is one of the most important earnings reports this week because it will show investors how the largest retailer in the United States and the world is faring. Between high inflation, consumer sentiment, and behavior, various factors could impact … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now
all-as-seen-on-logos