Seasonality came through

Hey Market Pilots,

Last week, I wrote about how February is normally seasonally weak. It took a couple of weeks for it to kick in, but when it did, it meant business.

During my class last weekend, someone asked me, “What happens with your account if the market stops going up?”.  Pretty appropriate question given the recent action. I told them that that was the beauty of using stops for my trading because when the market changes character, my positions get stopped out left and right. This not only protects my account, but it also is a very clear way the market is communicating to me.

The sector of names I have been trading for the last four months or so all fell apart mid-February as the seasonal weakness kicked in. Sure I gave some money back, but it’s a whole lot better than if I had hung on. Take a look around, the majority of names went straight down on Monday and I was out of nearly every position before that happened. Thank goodness.

Despite the weak February, there is always a bull market somewhere and it turns out to be in the “reopening” names. I’ve called these the Anti-Covid names. The names which need Covid to be gone in order to get back to normality. For some reason, that is where the money decided to rotate to when the rest of the market sold off. 

I am not sure if there was any particular reason other than how money moves around the market and the high fliers were super extended, so the money needed to flow somewhere. Weakness like the kind we are seeing is good and healthy for the market. Just give it some time to reset and then we can find fresh opportunities. This is a necessary life cycle of the market and I welcome it, because I had a great four months, and I look forward to the next few months once this has subsided.

If you are having trouble making money in the market or figuring out how to interpret charts, join me live on Wednesdays at 10:30 CT. I navigate the markets and answer your ticker questions in real-time. If it resonates with you, I would be thrilled to have you on the journey.

Over and Out,

Your Profit Pilot.


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