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I’ll be honest with you — I’m not exactly thrilled about trading Consumer Discretionary (XLY) stocks right now. The sector has been dealing with some serious headwinds and frankly, it’s not where I’d naturally gravitate.
But here’s the thing about markets…
They don’t care about our personal preferences, and sometimes the best opportunities come from places we least expect.
Take Lululemon (LULU)…
This stock got absolutely hammered over tariff concerns, and then you pile on fears of a weakening economy, and it’s been a rough ride. Normally, I wouldn’t give it a second look in this environment.
But when I’m evaluating potential trades, I’ve learned not to let my biases completely override what the seasonal patterns are telling me.
The Seasonal Factor That Changes Everything
Here’s where it gets interesting. Even though I’m not dying to trade Consumer Discretionary right now, I can’t ignore the fact that these stocks are seasonally strong heading into the fourth quarter.
It’s one of those market realities that tends to play out year after year, regardless of the broader economic narrative.
When I’m looking at a potential gap fill setup on a stock like LULU, that seasonal strength becomes a supporting factor. I’m not saying it drives my decision — the technical pattern is still what matters most — but it gives me additional confidence that there are tailwinds working in the stock’s favor beyond just the chart setup.
Building Higher-Conviction Trades
Ideally, I like a stock that has a good trend, above-average momentum and seasonal strength as well. That’s the trifecta I’m looking for.
Right now with discretionary stocks, we know that they’re seasonally strong, and honestly, that’s about all they have going for them.
But sometimes that’s enough to tip the scales.
This multi-layered approach is what separates the trades that work quickly and decisively from the ones that struggle. When you have multiple market forces — technical patterns, seasonal trends, sector rotation — all working in the same direction, you’re setting yourself up for higher-probability outcomes.
It’s not about being stubborn with your biases…
It’s about recognizing when the market is offering you something worth considering, even if it’s not your first choice.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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