August 2014 seasonality update

At the beginning of September I ran the seasonality scan as usual and was disappointed to find very little that looked attractive. 2 stocks met the scan to the upside, but with very poor consistency. September can be a tough month. It was only later in the month I realized I’d made an error and had scanned only the S&P500 stocks! Live and learn.

So, rather than do the September analysis as an exercise now we’re at the 23rd, instead here’s an update on how the scan on August seasonal players panned out. At the end of this week we’ll do the October run.

First a refresher on this scan

First off some background.

Our study looks at 7 years of historical data and looks at the returns for all optionable stocks for the month of August from 2006 to 2013.

We filter to find two sets of criteria

 – Stocks with gains in all 7 years during August
 – Stocks with losses in all 7 years in August

We do make an assumption that the month is 21 trading days and work our way back from the last day of the month. If the last day of the month falls on a weekend, then we use the first trading day prior to that date.

We make no assumptions for drawdown, nor do we look at the fundamentals behind such a pattern. We do compare the stock to the market during the same period and look at the average SPY gain/loss vs. the average stock gain/loss. This helps filter out market influence. We are now including group information to identify particular segments that might display a seasonal bias.

Finally we look at the median gain/loss and look for statistical anomalies, like meteoric gains/loss in one year.

In the Seasonality – monthly patterns for August 2014 article published on July 31, 2014

there were 2 stocks that had the most consistent patterns. They were UPL and DNR

DNR is Denbury Resources and it opened at $16.89 before dropping to around $16.13 into the middle of August. By the last trading day in August DNR closed at $17.22 for a modest gain of 1.95%.

UPL is Ultra Pete Corp and it opened at $22.97 and was relatively unchanged for the first half of August before rallying to close the month at $26.53 for a gain of 15.5%.

Before we leap off the cliff, I must point out that the market return in August over the 7 years is a paltry average of -0.06, as measured by SPY. However this August SPY gained 4.2%.

Here’s the charts for the 2 stocks.

See you again later this week with October’s seasonals.

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