Fortune magazine just ran a short article on Home Depot (HD), pointing out that hurricane season is coming. Right about now Home Depot usually makes a pop upwards in price, but we have a problem. And this problem is why we always tell people you must, you absolutely must look at the Factor Seasonals for a stock before you invest or trade because they will show how a stock acts in all sorts of environments.
But first, the best seasonal price forecast or projection chart for HD going forwards from this moment in time:
Right now, the Home Depot price behavior has most closely matched what it does during Bear Markets. Yes, Bear Markets. And with that knowledge, we can look at our Bull-Bear market Factor Seasonal chart of HD and see that the point of recognition is September 13. That’s when the stock possibly plummets. When you have your own seasonal software from our Super Seasonal Cash Flow Traders package, you can create this type of chart to determine this date exactly.
So how do you trade this? I wouldn’t. I simply look for the stocks where I have a much better certainty of outcome because all the factors are aligned. Every month I produce analysis for 100 stocks in each newseltter and ALWAYS find great trades. Home Depot has too much risk for me because I look for much better odds.
Oh, you mean you WANT to trade Home Depot, so you’re asking what to do? Well, come September 13 I might buy puts OR sell calls in a vertical credit spread. That’s me — it’s not a recommendation to you. Right now I might sell puts in a vertical spread as well…that’s me once again, not a recommendation. Buy for a pop? Too risky for me because of time cycles for the Dow Jones (of which Home Depot is a member) peaking the first week of September. It might go up but I just don’t like trades that short in time because it doesn’t give me enough time room for the seasonal to prove out, and with today’s volatility, I want all the factors in my favor. That’s why I go with the newsletter spotted set-ups.
Anyway, that’s how I do it. Doing it sometimes means “I don’t”. That doesn’t mean HD won’t go up or make money, just that the newsletter offers far better setups in my opinion.
Remember, check the Factor Seasonal charts before trading or longer term investing.