2nd Week Of The Month Continues To Be Bullish For The Dow
Today I exited my long DIA position on the close at a profit. If you recall I bought DIA on Monday's open and exited today based on my observation that the dow tends to rally the 2nd week of the month.
This trade has worked 10 times in a row! I first began trading this pattern about 6 months ago, decided to write about it 5 months ago and it has made me money every month since then.
I know a few of you did this trade with me and fortunately it worked out well for us.
Sometimes I'm a little hesitant to actually recommend a specific trade with entry and exit points because I'd feel awful if we all did the trade and lost money, but this has been such a powerful trade I had to share it with all of you.
Will this trade work next month? Will I take the trade? Well if the trend continues to be up next month then I will take the trade.
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3 comments:
Kevin, I've got an idea.
It could be related to hedge funds redemptions. Most hedge funds are returning money on the same day, so they have to sell. The investor must give a hedge fund 15 day warning (or something like that). Next month more money come back and they buy.
Always enjoy finding trends however they occur and your blog has some great finds and ideas.
Thanks
Kevin,
How do you define 2nd week of the month ? This month is a very good example. 1st Jun 07 actually falls on a Friday, is that considerred 1st of the month ? In your case, it is obviously not considerred.
I do a similar study on SPX on the expiration week. It is very bullish for the past 20 months. Let look at the detail.
This Friday was the expiration day for Jun 2007 option month, the SPX
again closed several point near the high of the month.
From Nov 2005 to Jun 2007 (20 months), there is more than 75% chance (15 months) that the SPX closes on high on the option expiration date. 12 months closed
less than 5 points from the high of the month, 3 months closed between 6-9 points from the high.
Just to list the month in details (closing SPX price from the high of the option month):
1) Nov 2005 : 1.3 point
2) Dec 2005 : 8.5 points
3) Feb 2006 : 2.2 points
4) Mar 2006 : 3.2 points
5) Apr 2006 : 6.9 points
6) Aug 2006 : 0 point
7) Sep 2006 : 5.0 points
8) Oct 2006 : 4.2 points
9) Nov 2006 : 2.6 points
10)Dec 2006 : 4.6 points
11)Jan 2007 : 4.8 points
12)Feb 2007 : 2.4 points
13)Apr 2007 : 0 point
14)May 2007 : 0 point
15)Jun 2007 : 7.6 point
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