A portfolio of 25 stocks for a possible January Effect

27 de dez. de 2021

Historically, some days or months have tended to be better or worse for stocks. These so-called market anomalies challenged theories of efficient markets. However, research shows that as these anomalies became more well-known and trading became more automated, these have largely all disappeared.

The January Effect is the perceived seasonal tendency for stocks to rise in that month.

Since 1938, 29 out of 30 years of gains seen in January-February resulted in an average yearly S&P 500 advance of 20%.

The January Effect is theorized to occur when investors sell winners to incur year-end capital gains taxes in December and use those funds to speculate on weaker performers.

Like other market anomalies and calendar effects, the January Effect is considered by some to be evidence against the efficient markets hypothesis.

In the below charts you can see the monthly performance of the Major indexes in the past decade!
Golden squares show the monthly performance of the Januaries in the last 10 years!


S&P500:


Nasdaq100:


Dow Jones:


Russell 2000:


Academic evidence suggests that any patterns in market timing where one is able to consistently generate abnormal returns are generally short-lived, as these opportunities are quickly arbitraged away and markets become more efficient as traders and investors increasingly learn about the patterns.

The January Effect seems to affect small caps more than mid or large caps because they are less liquid.

Since the beginning of the 20th century, the data suggests that these asset classes have outperformed the overall market in January, especially toward the middle of the month.

Conclusion:
I think based on the chart evidence and Data, Increasing the weight of smaller caps could be the best choice for the next 3-5 weeks!

My 25 picks for the next 3-5 weeks would be in the following watchlist:
https://www.tradingview.com/watchlists/69024534/

You can see the most important support (green lines) and resistance (red lines) to watch in the coming days in these charts!

Best,
Moshkelgosha

DISCLAIMER

I’m not a certified financial planner/advisor, a certified financial analyst, an economist, a CPA, an accountant, or a lawyer. I’m not a finance professional through formal education. The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts is appropriate for you or anyone else. By using this site, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site.

Reference articles:
https://www.investopedia.com/terms/j/januaryeffect.asp
https://www.investopedia.com/day-trading/best-time-day-week-month-trade-stocks/