Sell in May and go away

I do not like to forecast......because I am often wrong.  My way of trading is to follow where trends may take me.

There is a pattern that is just to obvious too ignore.  See the STI chart below:

For the past 3 years, if you have shorted on the 1st of May and sold anytime in June, you have made a bundle. See the arrows.  The start of the arrows is on 1st May.

The STI price for past 3 years formed tripletop-like consolidation patterns in Mar to April time period.  Upon breaking the neckline, fierce downtrend ensued.

Now lets take a look at each of the swing low to see when we can take profit of the shorts.

• For 2010, it is 25th May
• For 2011, it is 17th June
• For 2012, it is 4th  June

There does not seem to be any pattern here that we can take advantage of.  We can only take reference that the downtrend lasted for about 1 month to 1.5 months, upon which we must be ready to take profit.

Now if most people are aware of this May Syndrome, 2 things are likely to happen.

1. The sell off may take place in April, as people fight to get in to short first.
2. The opposite may happen.  There may be a breakout failure to the downside.  The price may go up instead.

Play out the different possible scenarios that may happen to your portfolio.  Have a plan ready to react to each outcome.  Because, if you have no plan, the emotions will get to you when the price start moving, and you are setting yourself up for failure.