Hot Stocks for August 1, 2022 - SHOP, ETSY, VALE, FCX Seasonality

UPDATE: the actual performance of this trading basket, on a capital-balanced basis, was +3.05% ROC for the day.

For the First Trading Day of August, there are many hot stocks projected to move significantly. The StockOdds Seasonality Dashboard provides quick insights for stocks, ETFs, or other securities likely to move in a given seasonality period such as monthly, first or last trading day, mid-month or 3rd Friday (option expiration) performance. In this case, we’ll take a look at a few symbols that typically have either bullish or bearish performance on the first trading day of August.

Seasonality for The First Trading Day of August 2022

Using the Free Seasonality Almanac, we can generate seasonality-related ideas for stocks to trade. In this case, we’ll look at the First Trading Day of August, which for this year is August 1 and falls on a Monday. On the first page of the dashboard, we can pick the top stocks to buy long and the top stocks to short by considering both the Average % Change and Odds data. In this case, we’ll look at Shopify Inc, Etsy Inc, Vale SA, and Freeport-McMoRan Inc.

For the first trading day of August, historically, SHOP has 66.7 Odds of going up (which means it has moved higher on this same day 4 out of 6 years on this day), on average +5.30%, and ETSY has 66.7 Odds with average moves of +4.22%. On the bearish side, historically, VALE has 100 Odds of going down on average by -2.59%, and FCX has 75.0 Odds of going down on average by -1.87%.

These numbers are drawn from the previous 8 years for VALE and FCX, and previous 6 years for SHOP and ETSY. This can be found by hovering your mouse over the expected performance (green and red) bars, as seen below, and looking at the number of Events.

Traders can use this information for context as to the seasonality of VALE and FCX, which may qualify as shorts, or SHOP and ETSY, which may be suitable longs. Traders may want to look at additional Signals for each stock individually before entering a trade to “line up the ducks” with complimentary Odds and average performance for the same day, or even for longer and overlapping periods, based on MFI, Bollinger Bands, Momentum and others. Even better would be checking the Top 10 Odds to see if these show up in the top Odds for the day.

Additional Signals can be found through the Dashboard Reports or through the WebScreener. As we near the end of the month, traders typically look at RSI and %BB values for confirming Odds and average performance.

Before taking these statistics for granted, it is important to look for factors which may have contributed to past performance. For these hot stocks, the latest quarterly earnings are typically released sometime in late July to early August (more details below). When it comes to earnings, there can be cases of “Buying the hype, selling the news,” which also contribute to their Odds and average performance on the first trading day of August.

SHOP Seasonality for August 2022

Navigating to the second page of the Seasonality Almanac, we can take a closer look at Shopify Inc's performance for the entire month of August, alongside SPY for context.

Looking at the bottom of the above screenshot, we can see the historical performance of SPY is slightly positive on the first trading day of August compared to SHOP which far outperforms the index. Also looking in the right-hand section, we can see the top 8 bullish seasonality signals for SHOP. 

The average monthly performance of SHOP has averaged +7.5%, with positive performance typically coming from the first and last 5 trading days in August. This gives indication that SHOP’s trading activity is typically choppy or bearish in between the given seasonality windows. This, along with looking at how SHOP is currently performing this August, can help frame intraday or swing trades for SHOP for the month.

SHOP’s latest quarterly earnings report is expected to be released on July 27, 2022.

ETSY Seasonality for August 2022

Navigating to the second page of the Seasonality Almanac, we can take a closer look at Etsy Inc’s performance for the entire month of August, alongside SPY for context.

Looking at the bottom Seasonality Timeline, we can see the historical performance of ETSY outperforms the SPY in only a few seasonality windows, but especially on the first trading day of August. Also looking in the rightmost section, we can see the top 8 bullish seasonality signals for ETSY for the month.

The monthly performance of ETSY in August has averaged +2.6%, and we can see the first trading day contributes most of the typical performance, followed by mean-reversion later in the month. This can all help frame intraday or swing trades for ETSY for the month of August, with positive performance expected at the beginning and near the end of the month.

ETSY’s latest quarterly earnings report is expected to be released on July 27, 2022.

VALE Seasonality for August 2022

Navigating to the second page of the Seasonality Almanac, we can take a closer look at Vale SA’s performance for the entire month of August, alongside SPY for context.

Looking at the seasonality Timeline at the bottom, we can see VALE historically underperforms the index by a large margin during the first trading day, 1^st Friday and mid-month (9^th-14^th trading days) in August. Given the average monthly performance of -5.1%, and historical performance during other seasonality windows, this would indicate negative performance during the first half of August, followed by choppy action for rest of the month. This can help frame intraday or swing trades for VALE for other days in the month.

Looking in the right-hand section, we can see the top 8 seasonality signals for VALE, from bullish to bearish. Since VALE is a potential short for August, we can refer to these signals to see the least bearish times to trade VALE stock.

VALE’s latest quarterly earnings report is expected to be released on July 28, 2022, which may impact the action on August 1.

FCX Seasonality for August 2022

Navigating to the second page of the Seasonality Almanac, we can take a closer look at Freeport-McMoRan Inc’s performance for the entire month of August, alongside SPY for context.

Looking at the bottom timeline, we can see FCX historically underperforms the SPY during the first few seasonality windows. Given the average monthly performance of -3.1%, this would indicate choppy, bearish action during the most of August, with most of the bullish action usually taking place during the last 3-5 trading days of the month. 

Looking in the right-hand section, we can see the top 8 seasonality signals for FCX, from bullish to bearish. Since FCX is a potential short for the First Trading Day of August, we can refer to this section to see seasonality windows that indicate the least bearish performance for the rest of the month.

FCX latest quarterly earnings report is expected to be released on July 21, 2022.

Closing Thoughts

The Seasonality Almanac Dashboard uses close-to-close (CC) performance, so one looking to take these trades has a few options. One could enter positions at the close on the last day of July and exit at the close of the first trading day of August or enter at the Open on August 1 if conditions are favorable. It’s worth considering, with overnight or even intraday trades, even though one has curated a high-probability trade, the market could interfere with its own agenda (that being what is most probable to occur). Most stocks tend to be impacted by larger market moves, so it is an advantage to hedge any trades in some way. Even with this in mind, why trade probability-blind when you can trade hedged, with the Odds!

If trading the above stocks in a combined basket, it is worth considering both longs have some correlation, as well as the 2 short candidates having some correlation from being part of the same sector.

By taking a quick look at the summary numbers at the bottom of the dashboard, we can see that 57% of stocks in the dashboard that meet our filter criteria have a positive expectation for the first trading day this month. In addition to this, we can also see that just over half the stocks are expected to outperform the S&P 500 ETF on this day. This can help set the context for August 1 as well.

If you’re a trader or investor, then we highly recommend that you take our Seasonality Dashboard course. In this course, not only will you learn more about why seasonality patterns exist and how to better utilize the Seasonal Almanac Dashboard but also have access to exclusive insights from some of the world's leading traders on using probability-based approaches for trading.