Sell In May And Go Away

by Olivier on May 2, 2011

First trading day in May and lo and behold, like clockwork, decent selling hits the market. I had mentioned the potential for the dreaded ‘Sell in May’ to happen earlier this year, which clearly didn’t happen. Today’s price action though, looks like the market is starting to be impacted by a seasonality pattern which is typically the weakest of the year.

Lots of stocks put in reversal candles. Granted, it is still a bit too early to call for reversal candles so let’s stick with ‘ugly candles’. A few stocks that I monitor closely that printed particularly ugly candles:

  • TZOO – Travelzoo: Superstar stock. The run looks like it is over. Every pullback now looks like a compelling short opportunity.
  • REDF – + SIFY – Sify Technologies: Lately these were the two best performing stocks related to India. Price action looks extremely toppy.
  • MOBI – Sky-Mobi: Momentum stock with a fantastic performance. Uptrend is still intact but today’s candle is very scary to say the least.
  • SLVSLWSSRIFVI.TO: Silver and silver related stocks are getting killed. No surprise. The charts were unambiguous and the divergences I wrote about were screaming to be extremely cautious on the long side.

Come June, I will be away for roughly 4-5 weeks. Looking at hundreds of charts I don’t see that many compelling position trades. So my plan is to be in cash while I am away as I won’t be monitoring the markets. It will be that time of the year with no Internet, no computers, no phone and no email. For me it is vital to do that at least once a year in order to completely recharge my batteries. I might put on a few trades until then but I will not send out emails as those trades do not reflect how I typically trade. They will be much more short term oriented and therefore not easy to replicate.

Don’t get me wrong, this still doesn’t look like a top for the market. But overall this feels like a choppy and dangerous market for position traders. There is no way I am going to be overly aggressive in this kind of market environment. Be patient and above all, protect your capital.

Important principles may, and must, be inflexible. – Abraham Lincoln

My public list with all my charts can be viewed here:

Buenas noches!

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