Hurricane season in the U.S. normally begins June 1 and runs through Nov. 30. However, October is the busiest month of the season.
Hurricane Helene made landfall last Thursday as the strongest hurricane on record to slam into Florida’s Big Bend Region and unfortunately the town where I live, Cedar Key, was devastated. I will admit, this one felt like a punch in the gut, seeing the destruction of such a beautiful little island. Fortunately, when we first built our home here in Cedar Key, we did plan ahead, knowing that hurricane season is a way of life for those who live in Florida and the Carolinas.
In an effort to turn this big fat negative event into a positive, I decided to write about my hurricane cycle strategy. A good number of our members take profits from their trading accounts and use those funds to donate to various Charites. Hopefully these ideas will help you, and those you know who are of the same mindset.
Weather cycles are just one of the many cycles that effect stock and commodity prices. For instance, if you ever watched the movie ‘Trading Places’ you will have a good understanding of how weather effects the price of Orange Juice. On the equity side, Home Depot (HD) Generac (GNRC) Enphase (ENPH) and Carnival Corp. (CCL) are just some of the stocks I like to trade during Hurricane Season.
The strategy is simple, take a position in the direction of the cyclical move and trail your stop up with the price of the stock. Note: Please don’t overlook the last part of this strategy, regarding the trailing stop, because as you will see from the following charts, most of these companies start off strong at the beginning of the cycle but experience a bit of volatility along the way. Protecting profits, especially during June and July, is important.
As you can see from the weekly candle chart of Home Depot (HD) the initial rally tops out mid cycle before profit taking pushed the price down from resistance.
Generac has a similar pattern to Home Depot, hence the reason why I stress the importance of using trailing stops. If you are an option trader, you wouldn’t use a trailing stop, you would adjust your deltas according to the technical signals. Long call spreads, short put spreads, calendar spreads after bullish pivots, are some of my favourite strategies to use with these types of stocks.
It just so happens we use an Enphase Battery bank for our Solar power system, and it worked like a charm when Hurricane Helene took down our grid. Not everyone loves solar power, but we are very happy with our system.
Carnival Cruise lines have ports all over Florida, so this is one stock that doesn’t like storm season. I tend to short CCL during Hurricane season, with long puts that have expiration dates towards the end of the season, or further out in time.
While there are no guarantees that the next season will follow the last cycles, Carnival Corp. has seen heavy selling throughout the entire cycle.
Pass it forward.
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