As of 12/07/2023   Indus: 36,117 +62.95 +0.2%     Trans: 15,299 +69.26 +0.5%     Utils: 878 -1.01 -0.1%     Nasdaq: 14,340 +193.28 +1.4%     S&P 500: 4,586 +36.25 +0.8%	YTD  +9.0%    +14.2%   -9.2%    +37.0%    +19.4%	Targets    Overview: 11/29/2023     34,500 or 36,400 by 12/15/2023   14,500 or 15,800 by 12/15/2023   900 or 825 by 12/15/2023   13,700 or 14,450 by 12/15/2023   4,450 or 4,650 by 12/15/2023
Chart Pattern Indicator: on 12/5/23

As of 12/07/2023   Indus: 36,117 +62.95 +0.2%     Trans: 15,299 +69.26 +0.5%     Utils: 878 -1.01 -0.1%     Nasdaq: 14,340 +193.28 +1.4%     S&P 500: 4,586 +36.25 +0.8%	YTD  +9.0%    +14.2%   -9.2%    +37.0%    +19.4%
Targets    Overview: 11/29/2023     34,500 or 36,400 by 12/15/2023   14,500 or 15,800 by 12/15/2023   900 or 825 by 12/15/2023   13,700 or 14,450 by 12/15/2023   4,450 or 4,650 by 12/15/2023
Chart Pattern Indicator: on 12/5/23

Bulkowski on Trading with the Trend

How many times have you read or heard the phrase, "Trade with the trend" and how many times has someone proved it?

I decided to take a look. I used my actual trades, but culled the list by excluding:

• Day trades;
• Trades held longer than a year;
• Old trades that no longer had price data;
• Short sales; and
• Non-stock trades like options and ETFs.

For each trade, I determined how the S&P 500 index faired over the hold time and how other stocks in the same industry did. I examined the closing price of the index from the date I bought the stock to the date I sold it. For the industry, I used the same method but counted the number of stocks closing higher versus those closing lower over the hold time. If the counts tied (such as when 3 stocks in the industry closed higher and 3 closed lower), they were not included in the analysis.

Trade with the Trend: Results

The table on the right shows the results. When the S&P index closed higher over the holding period for each trade and stocks in the same industry also closed higher, the trades gained an average of 15%, the best result of the bunch. When both the index and industry closed lower, the trades lost an average of 10%. That's the worst combination.

If the market climbed, but the industry suffered, I lost 7%. Finally, when the industry climbed but the market dropped, I made 7%.

The results say two things. First, trade with the market and industry trend for the best results. Second, it's more important that the industry is doing well than it is for the index to be moving up. That surprised me.

-- Thomas Bulkowski

See Also

• Best buy days. Which day of the week is the best one to buy or sell?
• Best buy months. Can buying at the end of the worst performing month and selling at the best performing be profitable?
• Buy low or buy high? Buy near yearly low for larger gains, less risk.
• Holidays. Does the market rise or fall before and after holidays? Answer: Fall.
• Market cap. Chart patterns in small cap stocks outperform.
• Market & stock trends. Buy in a downtrend, sell on the uptrend.
• Seasonality. What are the best months to buy and sell stocks?

 

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