Summer Doldrums - Quick Note
Trade Setups: AMD & INTC
The Hot Summer Rally quickly changed into typical Summer Doldrums — this is when the Independence Day Rally ends and low volume Summer trading begins. Looking at the chart below you can see that Nasdaq volume tends to dry up in July and August as Wall Street goes on vacation.
The daily chart of the S&P 500 shows how the candle range shrank as the volume shrank. The SPY is still on an uptrend above the 9 & 21 EMAs however.
Intraday price action is falling into the pattern of popping overnight, profit-taking at the open and chopping sideways most of the day. Beginning 7/5 at 4pm, notice that the slope of price action changed. Also notice the buy points around 3:30 pm EST and the take-profit selling around the open since Monday. This is typical Summer trading.
Meanwhile, breadth is falling as expected.
So what can active traders do during the Summer Doldrums? Here are some tips:
Set it and Forget It: If you have remaining positions, set a stop on the daily chart and forget it. Setting a profit-taking stop below the 9 EMA or below the previous day’s low are two good methods to protect profits.
Don’t Get Tricked: If you stare at the Intraday chart all day long, you probably will get tricked into taking trades that go nowhere and stop you out. Reducing screen time and walking away to enjoy your Summer is a good strategy.
Trade the Close: If you must trade, consider adding exposure between 3:30-4:00 pm EST and taking profit at the open.
Trade for Credit: This is a good time for selling option premium. Consider selling credit put spreads on SPY and QQQ. Here is an explanation of bull put spreads.
Trade Outliers: In this low breadth rally, it’s hard to find standout stocks, however there are a few such as TSLA, NVDA, AMD and INTC.
Trade safe and be sure to hold onto your profits during the Summer Doldrums. The market will come alive again after Labor Day. Most importantly, go out and enjoy your Summer!
For our Paid Subscribers we’ll go over trade setups for AMD and INTC.
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