How to Profit from This Holiday Trading Pattern

Money Morning Contributor
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Like tens of millions of Americans, I was shopping this weekend – out there in “brick and mortar” stores, no less. You know – the same retailers that are said to be heading the way of the dinosaur while they drag down the wider stock market at this time of year.

Well, while I did see a genius driving with one hand on the wheel and another desperately clutching the new 65″ flat-screen television he was holding to the roof of his car, I didn’t see much to convince me that real-world stores were going to mount much of a comeback challenge to the increasing dominance of online “e-tailers.”

But… my trip did bring to light a significant disconnect between Wall Street’s perception of retail and what actually happens in the real world.

That’s not going to help J.C. Penney Co. Inc. (NYSE: JCP) or Wal-Mart Stores Inc. (NYSE: WMT), but that gulf is something we can use to make some seasonal spending money – if we get started today. Here’s what I mean…

My Charts Reveal a Reliable Pattern

I’m a data fanatic. I love sifting through charts packed with numbers to set up my next winning trade.

And because I like a high certainty of winning, what I look for most in the data are pricing and time patterns that repeat again and again.

So fresh from my Black Friday expedition, I looked at the charts for the S&P 500 in the week after the Thanksgiving holiday.

I found that, despite the seasonal angst about stocks out there among pundits, over the last 10 years, 70% of the time the S&P 500, as tracked by the SPDR S&P 500 ETF Trust (NYSE Arca: SPY), moved higher in the week following Thanksgiving.

In fact, like “A Charlie Brown Thanksgiving,” this pattern repeats itself at the exact same time each year.how to profit

Over the last 10 years, the week after Thanksgiving gave the SPY over 276 cumulative points.

The best trade in the last 10 years was a 2.13% return, while the worst trade was actually higher at a 3% loss.

The bad news is that the average move over those last 10 years was $0.08. But this data doesn’t tell the whole story.

Let’s dig a little deeper…

The chart above represents the last 10 years of moves that the SPY exchange-traded fund (ETF) made the four days after Cyber Monday. The red of course represents the crisis and post-crisis years of 2008 and 2009, when retail really took it on the chin.

But most interestingly, the last six years have all been positive, and last year, we managed a cool 2% return even with the negativity on the first and last days in the range.

Now, to be clear: A trade put on with this data is a four-day trade with a 70% historical probability of winning. That’s not earth-shattering, but remember: We’re in this to make as much money as we can in the long term.

And if we can go against the crowd and take any money they’ve left on the table, the profits are sweeter.

Finding a hidden bullish pattern and putting on a winning trade beats “5 a.m. doorbusters” on Black Friday, Cyber Monday, or any day.

My recommendation: To take full advantage of this holiday pattern, consider buying some in-the-money SPY calls before Dec. 4, 2015.

Tom publishes his Power Profit Trades twice each week to help his readers understand and profit from options. You can use them to generate steady income, extreme windfall gains, and even “insurance” against losses. You can even use them to control big positions in some of the world’s biggest, most profitable companies for a fraction of what even one share would cost. Click here to get Tom’s Power Profit Trades for yourself. There’s never a charge for Money Morning Members.  

Join the conversation! Follow Tom on Twitter and Facebook.

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