Hot Stocks for a Santa Claus Rally

Hey there, Power Profit Traders!

To start, as I mentioned to you yesterday, I am working through a health bug and won’t be doing much this week, outside of getting my health back up to full speed as quickly as possible.

However, this won’t stop me from providing my intelligence and insights on the markets in my daily Power Profits Trades newsletter, and today you can still catch Team Tom’s own Mike Wade trading and teaching LIVE from 9:30-10:30 a.m. ET right here. (And don’t forget, you can now watch REPLAYS of my sessions right here!)

And just because I’m under the weather doesn’t mean that you can’t make the most of the holiday week. This means that I am insisting that you attend our first ever Mistletoe Mania event at 7 p.m. ET tonight! You can add it to your calendar right here – and trust me, it’s gonna be a PARTY… including some special gifts from the experts at Money Map Press!

But I won’t spoil it for you – just plan on attending, as it will be fun and entertaining!

Now, let me get back to trading what could be a Santa Claus Rally this week…

A Santa Claus Rally is a gain in the stock market leading up to Christmas and into the opening days of January of the new year.

While some analysts seem “surprised” by these end-of-year rallies, history indicates otherwise.

Even though yesterday was a downer of a day for many stocks, my Money Calendar Pro data shows that this week into January is typically a bullish time for the stock market.

So, let the history-unaware pundits try their hands at guessing if Santa might deliver a gain in the stock market this holiday season.

In the meantime, I want to break down a trade on one of the hotter segments in the stock market for this cold time of the year.

The Holiday Week Should Be Bullish

The recent trailing four weeks has seen a big pickup in volatility in the US stock market. During this time, in fact, the CBOE Volatility Index (VIX) – also called Wall Street’s “fear index,” my colleague Mark Sebastian’s specialty – has increased by 27.69%. This has come with the S&P 500 Index (SPX) giving up ground over the past few days at a rate not seen since May.

But after following the market data for decades, I’ve learned that history often provides a lot more market intelligence than just a few down days in trading.

My Money Calendar Pro data for the important trailing 10 years shows that this week through the beginning of January tends to be bullish for stocks.

So, the old market wives’ tales of Santa bringing rallies to the stock market has, indeed, plenty of proof on the calendar – if you take the time to look, analyze, and learn.

This is exactly what I do on an ongoing basis. I have an unbelievable collection of historic data that I draw upon to set up trades, using only the best historical signals over the past decade.

And I showcase my history lessons for you and subscribers of my Money Calendar Pro with full breakdowns for the markets, as well as for individual stocks and other securities. (For more info on this strategy, call our VIP Team at 1-888-384-8339!)

The Hot Stocks for a Santa Rally

Technology stocks make up the historically heated segment of the stock market.

And the leading Nasdaq-100 Index (NDX) allows us to track plenty of the biggies in the tech space in one fell swoop.

So far for this year, the index has returned 22.07% – pretty stellar in any trader’s book. But it’s the NDX’s recent pullback that got me digging into my market history for a great trade to make for this holiday week.

This quickly led me to the Invesco QQQ Trust Series 1 (QQQ) – a highly traded and followed exchange-traded fund (ETF) that synthetically tracks the performance of the Nasdaq-100 Index.

The QQQ has a great history of holiday success for the past 10 years. Only 2015 led to a bearish result, with all of the other years resulting in ample and attractive bullish gains.

QQQ Annual Trading History Around the Holidays – Source

Here’s an even closer look at data for the QQQ from Dec. 20 through Jan. 21 over the past 10 years:

QQQ from Dec. 20 to Jan. 21 over 10 years – Source

So, if history repeats, Santa could deliver a bullish tech trade for me into the new year.

My Green Holiday Trade to Make

That’s why, early Monday my trading buddy Jay Harris recorded a video explaining how we’re playing a “Green Loophole Trade” on QQQ in Money Calendar Pro.

Specifically, I opened a call debit spread by buying to open a short-term call option, and then simultaneously lowering the initial entry (which represents the maximum risk) by selling to open a higher-strike call in the same series.

The goal is to profit from a Santa Claus rally in the Qs without breaking the proverbial bank.

And that should make my holiday – and that of my Money Calendar Pro subscribers – all the merrier.

So, kids, that’s your Power Profit Trades lesson for today! Be sure to tune into Mike Wade’s Power Profit Trades session at 9:30 a.m. ET right here!

And then make sure to mark your calendar for tonight’s Mistletoe Mania event – it all starts at 7 p.m. ET tonight!

Have a great week!

Tom Gentile
America’s #1 Pattern Trader

One Response to “Hot Stocks for a Santa Claus Rally”

  1. Hi Tom,

    It seems like you’re big on placing Call Debit Spreads when you’re bullish on a stock, not Put Credit Spreads. Is that a fair statement? Why do you choose CDSs over PCSs? Wouldn’t you rather be collecting a premium? Or, is the POP higher with CDSs?

    I’ve just read and heard it said many times that buying Calls is only profitable 20% of the time (80% of the time, the trade expires OTM).

Leave a Comment

View this page online: