It's that time of year again.
Investors and traders all around the world, have the ‘Old Adage' echoing in their heads.
"Sell in May and go away, then come back again on St Leger day".
News reporters, analysts and investing companies are warning people, to not buy stocks in May.
Whereas I like to do my own research, and show you why I don't follow the herd.
In this article, we're going to see whether we should take what I call a “Maycation” or not and see if the adage is real or BS.
Let's start with…
364 investors exposed to a 109.89% gain
– Were you one of them?
One month ago, one of our analysts released a time-sensitive "strong buy" recommendation to a few lucky subscribers. He believed the market was going to start strengthening and that his tip would give readers the opportunity to profit immensely from this movement.
Boy was he right!
In a matter of a few short days, his tip hit its target – producing a phenomenal 109.89% for the lucky few who got in.
How the Sell in May adage came about…
The old adage took place where an entire city would plan a summer holiday attending a famous horse racing event in the UK called – St Leger day.
This led to less people buying the market, which created thin volume.
When there’s less buying, the market becomes volatile and uncertain.
This uncertainty leads to investors exiting from their positions, which causes the prices to drop.
When St Leger day is over, stock brokers and portfolio managers go back to the stock market, where things become normal again.
This may have had an effect many years ago, but with today’s algorithms and high volume of global trading – It makes sense why this adage falls flat.
Let’s see if we may trade or may not trade this month.
Ok no more puns… Let’s get serious and take a look at the JSE over eight different Mays…
The JSE yielded a return of 3.12% over eight Mays
from 2013 up to 2020
You’re looking at the ALSI Top 40 Index.
Since 2013, there have been 5 positive and 3 negative Mays…
That’s a win rate of 62.5% and a losing rate of 38%...
Over the last eight years, the JSE ALSI 40 has made a cumulative gain of 3.12%. This is when you add up all the gains and losses from 2013 through to 2020.
So if you followed the sheep and sold in May and went away, you would have ended up with losses over the last 8 years during May.
So what can we say about the old myth?
We can confirm, the myth is busted…
However, it doesn’t necessarily mean, we should just buy in May every year either…
Instead, we should treat May as any other normal month on the stock market and make calculated probabilities where it’s more likely to head.
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In the last two months, the ALSI has hit prices at all time highs.
In May, it looks like the JSE is going up even more and I’ll be sure to send you high probability trades which we can profit from. Only a few selected and most dedicated traders will see these trading opportunities… Click here if you’re one of them…
Analyst, Red Hot Storm Trader