Dow Stocks To Trade In October

October is the most volatile month, has brought the biggest one-day declines, and usually closes on the upside. We refine the analysis by looking at October behavior in the election and in the decennial cycles. Here is how it breaks down by the probability of a higher market by the end of the month:

All Octobers: 55.9%

Election Year Plus Two Years: 61.8%

Decennial Pattern: 30.8%

Both Election and Decennial Pattern: 66.7%

Here are the cycles-based trade recommendations for the DJIA stocks in this month. In September, the long trades returned an average of -5.0% versus a change of -8.4% in the DJIA in comparison to a return of -12.2% for the short sales. Over the last 32 months, the long stocks have risen by an amount about 60% greater than that of the short sales and 31% over the DJIA. The short sales were net negative over that time period at -25%.

For this month, the cycle/relative strength concept is applied. First, the Dow Jones 30 stocks are ranked from the best performer to the worst by calculating the expected return in that month. The top stocks were screened as follows. The top best traditional performers in the month were then screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month. The stocks that are both weak monthly performers and weak relative performers are short sales for the month.

The seasonal screen for the month is presented below showing the top and the bottom-ranked stocks. This new screen combines the seasonal rank for October in column two and the relative strength rank in column 3. The combined rank is in the last column. We can see that Johnson and Johnson is ranked second and sixth respectively and number one overall.

Potential Strongest Performers in the DJIA Stocks in the Month

Potential Weakest Performers in the DJIA Stocks in the Month

The market is likely to fall in the first half of the month and rise in the second half, closing the month on the upside.

Of the strongest, these stocks show strong relative strength and are considered buys for the month:

Apple
AAPL

Johnson & Johnson

Coca Cola

Travelers

United Health

Regarding the weakest, these stocks show declining relative strength and are suitable short sales:

Boeing
BA

Dow

Verizon

Intel
INTC

JP Morgan