Stocks are popular investments and at times show strong price movements. These movements can be seasonal in nature. For some it will be surprising that seasonality in the stock market can be rather dominant and no less so then in other investment areas.

However, in addition to the seasonality of an individual stock, the seasonal trend of that stock’s index must also be examined. Market professionals consider the seasonal course of an index more important then that of an individual stock. The reason is the seasonality of a single security results from far fewer pricing instances over a given time period then that of the index to which it belongs. Therefore the seasonal trend of a single stock is more susceptible to random events that have no seasonal relevance, but nevertheless appear in its seasonal chart.

Nevertheless, please remember our risk disclaimer. Even professionals find forecasting stock price movement difficult. Seasonal trends can only be a forecasting aid. The many other factors influencing the stock market must also be considered, such as changes in interest rates, company profits, and general market sentiment. Used sensibly, seasonality should account for about 10% to 25% of factors weighed in an investment decision.