Most traders are still chasing the same names — tech stocks, health care and the usual suspects. But when I pulled up my seasonality data recently, something jumped out at me that’s too good to ignore.
I mentioned this rotation on Opening Playbook recently, and with February just kicking off, the timing couldn’t be better.
We’re standing at the doorstep of what historically has been the strongest three-month window for Energy (XLE). And it’s not just energy — Materials (XLB) and Industrials (XLI) show the exact same pattern.
Energy is already moving, with XLE breaking out about 12% year to date. And when you look at how this sector typically behaves during this stretch of the year, it’s hard not to notice how hot it gets.
If the seasonal data holds true — and we’re talking about 36 years of historical patterns — this could just be the beginning.
The Data That Changed My Focus
When I break down the seasonal performance by sector, February shows Energy and Industrials as the top performers, with Materials right there with them. This isn’t about predictions or gut feelings — it’s about what these sectors typically do during this time of year.
Extend that view into March and April and the pattern gets even more compelling. Energy shows exceptional seasonal strength through this entire period. Same story with Industrials and Materials.
Meanwhile, Technology (XLK) and Communications (XLC) have been in slight downtrends and are falling out of seasonal favor. That’s not to say you can’t trade them — but why fight uphill when you have sectors with both technical momentum and seasonal tailwinds at your back?
Industrials has been performing well for a while now, up 7.7% year to date, and the chart structure supports continued strength. XLB has been in an uptrend, and the renewed strength makes it even more interesting.
Where I’m Shifting My Attention
Some of you may be thinking this Energy move is all about the Venezuela situation and political headlines from the Middle East. You’re not wrong — that’s definitely contributing. But the seasonal data shows Energy typically has a very strong first quarter regardless of the news cycle.
Politics might be the match, but seasonality is the fuel.
If you’re looking at which sectors are going to be the easiest to trade over the next few months, Energy, Materials, Health Care and industrials are at the top of my list. These are sectors many of us haven’t focused on in a while — maybe haven’t traded in a long time.
But that’s exactly where the opportunity is right now.
I’m not saying abandon everything else. I’m saying pay attention to where the seasonal wind is blowing and where the technical setups are confirming that strength. When those two things align, it makes our job a whole lot easier.
The rotation is happening. The question is whether you’re positioned for it.
Graham Lindman
Graham Lindman Trading
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