Stocks To Trade In October

I do not think that the risk has passed and is unlikely to end until late October. The average high in any year has been September 5th; the recent high was on the 2nd. Any analysis of the month of October begins with these observations about the month:

  1. It is the most volatile
  2. It has seen the largest declines
  3. The market usually closes on the upside
  4. The average low in any year is October 27th.

The low will likely be in the last week of the month.

Here are the cycles-based trade recommendations for the DJIA stocks in this month. In September, the long trades returned an average of -2.45% versus a change of -4.29% in the DJIA in comparison to a return of -6.07% for the short sales.  

For the month of October, the cycle/relative strength concept is applied. First, the Dow Jones 30 stocks are ranked from the best performer to the worst by calculating the expected return in that month. The top stocks were screened as follows. The top best traditional performers in the month were then screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month. The stocks that are both weak monthly performers and weak relative performers are short sales for the month.

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The seasonal screen for the month is presented below. The number of years of data is in the last column. The Times Return column shows the percent of months in which the stock rose. The Return column shows the average percentage gain in the month. The Expected Return column is the product of columns two and three. We can see that Goldman Sachs GS has been trading for 22 years and has risen in 81.8% in all the months of September. The average return has been 4.14% and the expected return is 3.39%.

Average Performance of the DJIA Stocks in the Month of October

Of the strongest, these stocks show strong relative strength and are considered buys for the month:

Goldman Sachs

Salesforce CRM

Microsoft MSFT

Travelers

Regarding the weakest, these stocks show declining relative strength and are suitable short sales:

Boeing BA

Caterpillar CAT

Verizo VZ n

Amge AMGN n

Honeywell