SCT Podcast - Episode 35

SCT Podcast

Sarah: Hi everybody, this is Sarah Potter from “She Can Trade” and this is the SCT podcast, we are at episode 35, I have TJ here

TJ: Good Morning

Sarah: And today we are going to talk a little bit about how the market shapes in the summer and what to do through the summer months particularly in the market, so we are really in the middle of the summer now, we are moving into mid end of July and then especially as we roll into August, sometimes we can get questions about whether it’s worthwhile to actually trade in the summer or whether we should just avoid it and move back in the fall. And obviously since TJ and I are both trading, we would obviously suggest that yes, there are still great trades to be had in the market, it’s just about being aware of what’s happening in the market and adjusting your trade strategies according to what you are seeing as opposed to may be being too determined and focused in only looking for the same set up over and over again in the summer, so I will suggest the biggest thing that you need to think about summer is you need to be flexible, flexible with your mindset of what you see in the market and then what strategies can work accordingly as opposed to saying, I don’t have a trade calls, I do really well in calls, so you only look for is calls. So I don’t know how is your summer been so far TJ?

TJ: So far it’s been great, trading has been still really great, I don’t know when to really step away from trading in this summer, I think there’s still lots of opportunity obviously, I think I agree with what you say, you do have to match your strategies and market conditions but I think that’s any time of the year, we really have to pay attention to what the markets are doing. I think it was two years ago, memory service we woke up two or three mornings in a row in August and I remember distinctly one morning, the S&P was down over a hundred points premarket and that was in August, that was supposed to be a slow summer time to trade and we were still seeing lots of volatility. Governments don’t shut down, countries don’t stop bickering over the summer, you know there is definitely presidential issues that will continue in September, they are not taking a back seat or a vacation, so I think there’s tons of events that can move the market and that we can trade, we are in earning season right now and it’s the summer that’s creating the volatility for a lot of stocks, so you know, I do agree that, we do need to pick some time to kind of step away and recharge and if that’s the slow week in the summer to recharge your batteries and come back and focus, then absolutely, but I think just a step away from the market because it’s summer, I don’t know, I think things have changed lately, I think with the retail trading and more and more online trading, the more retail traders that are out there trading the market, trading all it around, there is no real season now to it, what do you think?

Sarah: yeah, especially, It’s to know that retail trading and we should mention that, right, we are professional retail traders, you are all retail traders by being involved in the market with someone who is not managing other people’s millions of dollars, you are basically trading for yourself, so that makes you retail trader. Remember, you are basically most likely trading with other retail traders as well and in fact, lot of people might be on vacation so they actually might be bumping up their trading more than ever because a lot of retail traders might have more time through December to actually focus on this, perhaps things are lighter for you at work and so you have more time to really focus on finding stocks or getting better at trading, finding more trades, all of those things can happen in the summer. They can actually be a really great time to test strategies too and I don’t know if it’s just about, depending on where you guys live, just having more sunshine, generally more people are happy through summer, may be if they are getting more because they are on vacation, I don’t know. But I think that means that, there’s lot more people interested in looking at the market and paying attention to it and sometimes when you are not as busy, you can still find trading opportunities as well. So certainly there’s a lots that we have in summer and just because the weather is warm outside, it doesn’t mean you can’t take your laptop outside and trading too right.

TJ: Yeah, that’s absolutely right, I think you make a good point there, how many people have taken some vacation in the summer up at their cottage or the way they pull up their laptop at the dark right on the deck and actually spend time trading or in the markets where, they normally have that 9 to 5 job where they don’t have that time. So, definitely some advantages there, I do think that we need to discuss kind of few pointers and a few things that we kind of should look for in summer trading because, yes, we will have those weeks where, it is just, the volume is just so low and the markets really don’t move. So I think that’s the key point, it’s we need to look for volume, look for those low days, look for those sideways weeks and when we get into those weeks or those days of trading then absolutely those are days to maybe go and improve your golf game. I think we do need to pick and choose when we trade but there is still with 3000 stocks in the NYSE, there is still ample opportunity every week to find your four, five, six trades.

Sarah: so on top of that, my tip would also be in terms of summer is, if you normally trade, let’s say six or eight trades every week, don’t go out to the market and say, I need to find my six or eight trades this week, it has to be six or eight and that’s what I mean by flexibility, this week you might find three because things are slow but next week you might have 14 on, so just be flexible with the numbers, don’t get too caught up in looking for a certain amounts of trades every week, you want to look for good quality trades. Another tip I think I would suggest is being flexible with the industries you are trading as well. Just because, say, you can’t find something in one industry and you love to let’s say only trade technology stocks but things are a little slow in that or they are just not as accountable as they usually are, then look through different industries. Summer can be a great time to try different areas and to try different stocks as well. Certainly the evidence you are looking for still looks the same, so I am still going to look for stocks that have a history to them, I am going to look for something that has a long term trend that I could take advantage of and I am going to mirror that with some other shorter terms charts to find nice entries and exits, I am going to look for a mixture of trades that have momentum as well as the mixture of trades that are pretty well standing still but I might do that in some new stocks that may be I don’t normally look at other times of the year.

TJ: Yeah, absolutely, that makes sense and I think that’s the way I look at it as well, maybe I have been trading Amazon every week through the spring, may be Amazon is a stock that starts to slow down in the summer and July or August, may be it doesn’t, but if it does, I will just move to something else. I think it’s more about, we need to pay attention to and I think be aware of when, which stocks are slowing down and when they are slowing down and just having that flexibility to trade and not be stuck in one strategy or one stock and just keep doing the same trade over and over again for six weeks and when or why it stop working or why price isn’t moving as much as it did three weeks ago.

Sarah: One thing though, I definitely want to mention in the summertime is, for people that look for trade set ups where you are looking for the whole of the market to change directions completely, sometimes because the volume is lower, those kinds of trades at the time is going to eat out a little bit, so what I mean by that is over the last few weeks, we have had a lot of stocks that have started to trend lower, so there’s a lot of people out there who I think are looking for everything to reverse and to start moving up higher again and what they are spending time is buying calls on dips and suggesting, ok, well this has to go up, this has to go up and I would just throw it out there in the summer because we are going to have some weeks that are going to move sideways, if that stock price has a lot of resistance specially on a weekly chart as a result of the last couple of weeks that are sold off, I would suggest it’s actually better to wait for those positions to get through that resistance first and then by the calls, so that traditional philosophy of buying on dips, it still good but I would suggest you really need to look at something like a weekly chart and just make sure that when the stock did sell off that there isn’t some established resistance there, because there is nothing worse than sitting in something like a call, so the assumption that’s going to move higher, but price just moves sideways through the summer because there is not enough volume to get that through that resistance. So may be waiting an extra week before you place trades like that, you could put them down on your short list but don’t buy, don’t get into calls and expect things to pop up right away when it’s moving into resistance through the summer especially.

TJ: Right and I would like to ask you questions well, and we can discuss, this is about expiration and I think that we do, that’s another point that we have to, that trader should look for in the summer is expiration Fridays because it is a Friday, people are leaving work early, they are stopping trading, they have got other things to do on Fridays, that we will see, there is a tendency for a little bit of kind of a slow Friday where we are not getting the moves on Friday that we would see on a normal expiration day, but we can also see what happens is, we get a move and then it kind of just drifts sideways on low volume and then we will see at the end of the day where there is a counter trend move to that, so I think we do have to pay attention to on low volume Fridays to expiration and just keeping an eye on how things are moving and with low volume may be support and resistance that would have held, had there been a lot of traders trading at that levels, you may not hold as well, so depending that we see on a high volume day during the year might not happen in that low volume just because there is nobody trading, not enough people trading those levels to keep price above or below those key areas of support or resistance.

Sarah: Yeah, that’s a good point, expiration can act a little differently in the summer, especially with long weekends too, that’s something to be aware of, but I think most people know that anyways those Fridays can be tricky days in particular, so if you are looking at trades and was thinking about now, we move into August and even into the end of August, and September, when you are setting up your trades also keep in mind of when that long weekend is, may be you want to take the week before or the week after as well and not even deal with that Friday because those don’t characteristically work as well as they would any other Friday throughout the year just because of volume things will now, that can be good or bad but if you want to increase the probability of what generally happens, then I would suggest taking the trade out to expire not on the long weekend, the Friday of the long weekend but take it out another week.

TJ: yeah, that makes sense, absolutely that makes sense, so I guess leave that with one or two trade take aways that our listeners can use over the next few months, so for me, I think it would be watch volume, watch the ATR as well, how much is the stock per moving, is it in a quiet period, is it not in a quiet period and just make that you are trading according to what the stock’s dealing, not what the stock has done three or four months ago, what it’s actually doing right now this week, today.

Sarah: Well, on that and I might may be just agree a little bit, is that I want to definitely be trading only stocks that have lots of history, so that is also very helpful because I do want to know what it has done in the past, I do want to use the but I also need to be setting up my trades to be realistic about what’s going on and you are right, like if it hasn’t happened, may be things to happen the fall, you see things move more than you do in the summer, you don’t expect that the price is going to move like it does in the fall, but we can still expect that it will move as it normally does through the summer time, so you can go back in history and see that stocks do still move in the summer and we still can trade those ones, but I would definitely stay away from newer stocks, I want to take stocks that are trending nicely and then I think my biggest step is looking for trades that are already moving in that direction as opposed to looking for trades that are going to switch directions, you are going to have much more probability of success in the summer because we don’t really know which week or day is going to be slow, we can’t anticipate but that will happen though because it is summer time, so generally trading in the same direction that it’s already moving in is helpful without having to do with any resistance, save the trades for pops and momentums into the fall and into the winter. Alright, another great podcast, I look forward to see you all, remember you can see us trading live in the live trading room at Shecantrade.com and all of your reviews are really helpful up on iTunes and anywhere you can post them. Happy trading everybody.