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Here, we compare the seasonal performance of two indices, the XCI computer index and the NBI biotech index. We simply generate seasonal data for both indices, and subtract the data found in one from the data found in the other (with a couple necessary adjustments). One can verify that the resulting charts "make sense" by comparing our usual XCI charts with our usual NBI charts...you can see that the charts below "merge" the two indices fairly well.
Below, we've subtracted the seasonal NBI index values from the seasonal XCI values to get charts that detail how the two groups tend to perform relative to each other. One can see that computer stocks have tended to outperform biotechs in the March to early May period, and suffer considerably versus biotechs in August and September.
In this case, we refrain from generating candlestick charts. That's because, in the act of subtracting one string of data from another (closeA-closeB, openA-openB, etc., for every day of the year), you can get a closing price that is higher than the day's high (and other nonsensical outcomes). The result is chaos.
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Given the interest in biotechnology stocks, we offer a list of other charts that may be of interest to biotech investors. Outside of a couple major yearly conferences, there would seem to be little of a seasonal nature to drive biotechs. However, there certainly does seem to be some seasonality in investor's risk tolerance, and biotechnology stocks are nothing if not risky. At the same time, drug makers are somewhat immune to certain macroeconomic forces. We'd also point out a "give and take" relationship between volatile biotechs and semiconductors. In the end, this group of stocks has some unique characteristics that serious investors should be aware of.
The biotechs below are "pure"...we haven't included medical device makers, or large pharmaceuticals.
Potential investors should utilize our seasonal charts in conjunction with other indicators of future success. Our tests do seem to indicate that these charts can increase the likelihood of profitable trades, but these charts certainly should not be taken as the "end all and be all" of successful trading.
The yearly seasonal charts are compiled by simply averaging all historical percentage gains/losses for the first day of the year, second day of the year, etc. The quarterly and monthly charts are compiled in similar fashion, but this time we overlay the days of the quarters and months, as opposed to days of the year. The quarterly charts are particularly useful when viewed in light of quarterly earnings and dividend milestones.
Feel free to request additional charts (in moderation): khodge @ stockwarrants.com .
For more background and caveats on our charts, visit our main "seasonal charts" page.
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