That time of year that we all hold our breath for is just around the corner. The date is etched in our mind, having long surpassed our birthday in importance. Yes, it's none other than tax time, April 15th.
And the biggest company associated with tax season is Intuit, maker of the tax preparation package called TurboTax. Intuit releases a new version each year in the fall updated to the latest federal tax forms, and releases state versions shortly after the beginning of the year. Because users need to have the latest version each year, Intuit has a business model most companies can only dream about. And to preserve their business model, Intuit spent millions on lobbying trying to prevent the IRS from offering fee-free electronic tax filing (which failed for lower-income filings, but Intuit has learned how deal with it).
So Intuit stock (INTU) must do well this time every year because of their sales cycle, right? It is true that Intuit's quarterly revenue is much higher in the quarters reporting in mid-February and mid-May versus the quarters reporting in mid-August and mid-November, matching the peak TurboTax sales cycle that lasts from December through mid-April.
What is not a reality is Intuit stock pricing matching that sales cycle. Over the next 4 weeks, INTU has gained an average 2.3%, with gains in 65% of the past 20 years. But by the 19th week from now, which this year takes us to right after April 15th, INTU's has logged an average loss of 3.4%, with losses in 12 out of 20 years.
INTU has enjoyed a nice 29.7% gain since the start of the current run that began on June 25th. With the overall markets pulling back in recent days, INTU has been setting new all-time highs.
But will that last in view of INTU's seasonal track record? Looking at the current chart we see that while the stock has been hitting new highs, the Stochastics are falling off. This suggests that the stock is starting to close more often near the low of the day, often a sign of a weakening stock.
The ‘common sense' view of INTU is that it should gain, in sympathy with an increasing sales cycle, into mid-Spring of 2014. But the track record suggests the big players have already played any rise in the stock and may be cutting back on their positions. The seasonal chart does not have a strongly negative pattern that could be played with bearishly-oriented trades. But it certainly suggests that short-term traders should avoid this stock for the near future. The seasonal track record is in conflict with the common sense trade.
Fed announcement
The Fed meets this week starting Tuesday, to be followed by a possible announcement of the start of ‘tapering', the winding back of their bond-buying. This could cause turbulence in the markets, and the initial market response to their announcement at 2pm Eastern on Wednesday may not be in the same direction the markets head later in the week. Beware of trading right after the Fed announcement. Within a few days afterwards, institutional trading will make it clear what the professionals are thinking.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
By Gregg Harris, MarketTamer Chief Technical Strategist
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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