Buy Internet Stocks During Summer Doldrums

July 23, 2014 12:45 PM

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Buy Internet Stocks During Summer Doldrums

The Internet sector has a favorable period that runs from the beginning of August and lasts through the beginning of January with a historical return of 28.6% over the last 15 years, 17.1% over the last 10 years and 8.6% over the last five. First Trust DJ Internet (FDN) is an ETF that has historically correlated well with this seasonality. FDN’s top holdings encapsulate the big movers of this sector: Google (GOOG & GOOGL), Amazon (AMZN), Facebook (FB), eBay (EBAY), Priceline (PCLN) Salesforce.com (CRM), Yahoo (YHOO), Netflix (NFLX), LinkedIn (LNKD)

 In the following chart, FDN’s closes (solid black line) have been overlaid on Internet Sector’s weekly bars to demonstrate how closely they correlate. . The Internet Sector’s one-year seasonal pattern appears at the bottom of the chart with its August-January seasonally favorable period highlighted in yellow.

After bottoming in early May with technology shares, FDN made a rapid advance through early July, but stalled at projected monthly resistance (red dashed line). FDN came under heavy selling pressure earlier this month and would be attractive just below its projected monthly support level (green dashed line) accompanied by improvements in its stochastic, relative strength and MACD indicators. 

This FDN trading idea first appeared in and Almanac Investor Alert on July 8, 2014 with specific buy limit, stop loss and target suggestions. Not a subscriber? Sign up today for a Free 7-Day Trial to Almanac Investor to continue reading our latest market analysis and trading ideas.

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