Trading Places with Tom Bowley

Here's A Sector And A Stock That You Don't Want To Ignore In November

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I have a huge preference for owning companies that are leaders within their industry and the industry itself is a leader. So it's very hard for me to argue against a company like Deere & Company (DE), which has been showing leadership attributes among commercial vehicles & trucks ($DJUSHR). The following is a chart of DE with multiple relative strength panels supporting its leadership role:

The only potential downside is that the current channel (by drawing a line that connects highs and then copying that line to connect lows) suggests DE could fall back at some point after a big run. But, if history is any guide, that period of consolidation is more likely to take place in the first quarter of 2021. Check out DE's seasonality chart over the past two decades:

Q4 tends to be very strong for DE as it's averaged gaining 11.8% during this quarter alone over the past 20 years. Q1, though, averages gaining just 0.1% over the same time period, so I'd be expecting consolidation to take place then. For now, DE remains a very strong trading candidate. By the way, the DJUSHR's best month, by far, is November as well.

There's also a very important seasonal factor in industrial stocks (XLI) in general. November tends to be extremely kind to this group as you can see from the seasonality chart below:

The XLI has risen during 90% of the past 20 Novembers. That's 18 out of 20. There are never any guarantees in the stock market, but 90% gives us a very strong probability of higher prices here. I know some of you are historians as well and might be saying "yeah, but November is strong for all stocks". That's mostly an accurate statement, so maybe showing the XLI relative to the S&P 500 might make some sense here:

This should really put things in perspective. The XLI outperforms the benchmark S&P 500 90% of Novembers this century and look at the AVERAGE outperformance! No other month is remotely close. Industrials OWN the month of November and DE is one of the leading industrials. Adjust your trading strategy accordingly.

At EarningsBeats.com, we're about to unveil our latest monthly research product - Seasonality. We'll be alerting our members to the most promising sectors/industries/companies in the S&P 500 each month. Another November seasonal winner will be unveiled tomorrow morning in our FREE EB Digest newsletter. Don't miss out! You can subscribe for free (no credit card required) by providing your name and email address HERE. You may unsubscribe at any time, no questions asked.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More
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