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What to Know Before NVDA’s Next Seasonal Pattern
What to Know Before NVDA’s Next Seasonal Pattern
BY MICHAEL SALVATORE, EDITOR, TRADESMITH DAILY
TradeSmith’s unending goal is to use data to raise your odds of success in investing and trading.
And one big part of raising those odds is our Seasonality software – which just got a big upgrade from a key figure in our business.
Michael Carr is our Chief Quantitative Strategist. Before he was a full-time trader, he was writing code for the U.S. Air Force and working in cryptography for the Pentagon.
Later, he became a money manager who more than doubled the S&P 500’s return coming out of the financial crisis – without owning a single individual stock.
Now, he’s brought that same technical firepower to TradeSmith. And over the last year, he’s helped our firm make significant leaps in Trade360, Predictive Alpha, Options360… and most recently, Trade Cycles and our Seasonality software.
Today I’m featuring a transcript of a recent conversation I had with Mike all about our latest upgrades. Let’s get into what’s changed, why it matters, and how investors can actually use these tools right now…
Michael Salvatore, Editor, TradeSmith Daily: Mike, thank you for joining me today.
Mike Carr, Chief Quantitative Strategist: Thank you, happy to be here.
Michael Salvatore: You joined TradeSmith around early 2024. Coming in fresh to Trade Cycles, where did you see the biggest opportunities to refine the systems we had and make them most useful for our subscribers?
Mike Carr: The biggest thing was finding which of the countless seasonal windows we identify are the most important.
So we started by making a definition of an optimal window. And then that narrows down the number of opportunities.
You may have just one optimal window to buy a stock like Amazon (AMZN), rather than four seasonally favorable periods. In Amazon’s case, that optimal window is June 12 to July 20. The stock has been up 100% of the time in the past 15 years, with an average return of 8.2%.
And then at the bottom of our seasonality charts, you’ll see we added the Relative Strength Index (RSI) – a measure of overbought and oversold conditions – as a momentum filter.
That’s important because when you see strong seasonality, you should also confirm by looking at the current momentum of the stock. That narrows down your windows even more: You’re only buying when RSI says the seasonal window is likely to succeed.
And we found that we were able to generate a win rate in the back testing of over 80% by finding an optimal RSI for each trade… compared to about 60% without momentum.
Michael Salvatore: I was just looking at a stock that’s a perfect example of what you’re talking about: Nvidia (NVDA).
Over the past 15 years from Jan. 30 to Feb. 19, there’s a window when it’s gone up on average 9.8%. And it’s been up 93% of the time.
But what you’ll notice below is that TradeSmith puts the optimal RSI as less than 53:
So, that seasonal window is even more optimal when Nvidia is trading below that value on its Relative Strength Index.
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Mike Carr: Actually, there’s another interesting thing about Nvidia…
We’ve added the Seasonality Statistics page, which you won’t find anywhere else. It shows how the stock has performed in various, more granular seasonality patterns..
Here’s the monthly view. See that red line there? That’s April. Two-thirds of the time, Nvidia has declined in April:
I found that was pretty interesting because early April is generally a little weak for stocks.
One reason why is because investors often have tax bills to pay. So they typically sell something to raise cash for the IRS.
Now, Nvidia has been a big winner. So, April 14th, when your accountant calls and says, “you owe this much.” What do you want to do? You sell Nvidia because it’s sitting there with a lot of unrealized gains.
Michael Salvatore: Yeah, this is such a valuable addition to our Seasonality suite of tools because it gets even more granular than that.
If you look closely, you can start to see that there’s an unusual seasonal pattern down to the very day. On the 17th of each month, Nvidia seems to have one of its worst losing days, as well as at the end of the month:
That’s probably for the dynamic you just talked about, rebalancing and things like that.
Mike Carr: Exactly.
Michael Salvatore: Okay, Mike, so the Seasonality Statistics page is new. The seasonality algorithm has been updated.
But there’s also another big thing we’re bringing to Trade Cycles that a lot of people just learned about in a recent presentation from our CEO, Keith Kaplan. That’s this new five-stock strategy that we’ve applied to seasonality.
Now, if you’ve been following TradeSmith for a while, we’ve launched a lot of these five-stock portfolios recently. They’ve proven to be very popular because it’s a great way to simply trade the market for provably market-beating returns.
So Mike, tell me about this new seasonality-based rotation portfolio. And tell our readers why we’ve been picking five stocks in general. Why is that such a sweet spot?
Mike Carr: We get that question quite a bit. Why five?
Well, the simple answer is that our testing found that to be the right balance of complexity and returns.
We’ve tested three, four, six, seven – but five had the right balance of results.
So we’ve tested and confirmed five, but we actually first picked five based on a long-running theory that shows you how many positions you should own.
This theory actually dates back to the ’50s when AT&T wanted to figure out how to maximize the use of long-distance phone lines to hold their costs down.
AT&T’s researcher discovered they encode what was said into telephones as bits, a digital signal. And then they send that code down the line and recreate it on the other end. Our voice isn’t actually traveling on the line – an encoded version of it is.
The formula they used to encode our voices is called the Kelly Criterion. Down the line came a guy named Ed Thorpe who used the Kelly Criterion to optimize hands of blackjack based on how much risk was in each hand.
That got him banned from Las Vegas blackjack tables. And then he had to turn to the stock market, and he adapted the formula further to that.
So we’re continuing to build on Thorpe’s work here by applying it to building portfolios. In assessing risk vs. reward, we found that five positions is the right number.
Michael Salvatore: That’s quite the lineage. And today our five-stock portfolios are using some of these fundamental principles.
And it’s important for people to understand that we really see this as a portfolio.
Can you speak directly on that? Because that’s a very common question we get. Like, “What if I want to swap this stock out?” Or “What if I want to buy more of this stock and less of this one?”
Mike Carr: That’s a big advancement that we’ve made in how we think at TradeSmith.
The five-stock strategies, that’s not a list of the five best stocks. It’s a list of the best five-stock portfolio. And the difference in the portfolio is seeking to maximize returns. We’re calculating the right level of risk and reward across the five.
Michael Salvatore: This is also how the big institutions trade. They don’t think, “I want to own some of this stock and some of that stock.” They’re thinking, “How does this all fit into one cohesive strategy?” And that’s what we’re doing here, too.
Now, how are we applying seasonals to this?
Mike Carr: Starting with the stocks in the S&P 500, the most liquid stocks in the world, we look at their monthly performance from the ninth trading day of the month to the next ninth trading day of the month.
In our backtest, trading on the ninth day delivered the best balance of risk and reward. So we’re measuring the top performers over that time. We start with a list of the best performing stocks in that timeframe, then narrow that down with our portfolio algorithm to identify the best five stocks to hold for the next month.
Michael Salvatore: And this new strategy is kicking off Feb. 12. So if you’re one of the thousand-plus people that just joined Trade Cycles– or one of our Platinum members that receive everything we publish – just hold tight. The new strategy begins Feb. 12.
And if you haven’t joined Trade Cycles, you can watch a replay of Keith’s webinar on the seasonal portfolio strategy to learn more.
But while they wait for this new portfolio to kick in, what would you recommend be the first thing they do?
Mike Carr: We’re hosting several webinars explaining more about those portfolios.
We’ll hold two of them on Feb. 10, at 1 p.m. ET and another at 7 p.m. And we’ll have another on Feb. 13 at 1 p.m.
Folks who have attended past webinars know that we take care in answering every single question. So watch for emails that’ll have the links to register.
Michael Salvatore: Mike, thank you so much for joining us today. We’ve had a ton of new people join and I know they’ll find this and the educational webinars helpful.
Michael Carr: It’s my pleasure. Thank you for having me.
Michael Salvatore here… If you missed it, I hope you’ll check out the replay of our Prediction 2026 event.
Keith will walk you through the seasonal patterns coming up that you need to watch for… Why they keep working even when markets get chaotic… And how to put them to work in your own portfolio.
As you’ll see, getting your timing right could matter more to your wealth than any stock pick you make this year.
And the first date to watch is Jan. 28. If this seasonal pattern plays out as expected, it could unlock one of the best trading setups we’ve seen in decades.
So check out the replay while there’s still time.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
