Retail Stocks – Trading Strategy for Year End Seasonality

Have you ever seen early holiday shopping deals in October?

You may not be thinking about the holiday shopping season yet, but the retail stocks have been anxiously waiting.

Every year there is a seasonality trade opportunity in retail stocks. I will share the details on this trading strategy in this article.


Retail Stocks – The Seasonality Trend in Retail

Every Thanksviging in the United States kicks off holiday shopping for Christmas.

Black Friday is a massive retail shopping day.  In fact, the very reason it is called “black” Friday is because some retailers move from losses (red in the book) to black on this single day.

In 2017 alone, a whopping $682 billion US dollars were spent.  This is a 4% increase from the prior year.  On average, the average consumer will spend $930 on average on this day.

Retail business booms and the US retail stocks rally in anticipation of the profits from consumer spending.

Taking a look at the chart below, you can see that between October and December of every year retail stocks climbed an average of 10% in the last 20 years.

Seasonality trends are a big opportunity for the trained trader.


Retail Industry Seasonality

Retail Industry Seasonality


Retail Stocks – What is the Trading Opportunity?

Simply put, the trade idea is to be long retail stocks by late October and hold into the end of December.

It is very important to realize that you are making money on the hype around increased retail stocks earnings.  You will not know the final holiday season sales until the following quarter officially.

By that time, you will have closed the trade and made the profit and moved to the next opportunity.

Essentially, you are making money by buying the rumor and riding the wave, but selling before the actual news hits.  This is what I call the professional money trade.


What Retail Stocks are Best to Buy?

Imagine having to read through dozens of company statements to find a short term trading opportunity?

The good news is that you don’t have to.

You can actually purchase a well diversified retail stocks portfolio with one symbol.  This is the concept of an Exchange-Traded Fund (ETF).

My favorite retail stocks ETF is the “XRT”.

Here are the top 10 sectors the XRT Retail Stocks ETF holds:

XRT ETF Top Holdings


Also, here are the top 10 holdings of the XRT Retail Stocks ETF:

XRT ETF Top Ten Holdings

You can see above that these top ten holdings account for 12.75% of the portfolio.

Ten retail stocks represent over 10% of the top holdings.

This is normal for an ETF structured product.

Therefore, by purchasing the XRT symbol ETF, you are buying all of these companies at the same time for one low cost.


How Do Online Sales Impact Retail Stocks?  (The Amazon Effect)

In the last few years the trend is favoring online sales. This is likely not a surprise to you.

Cyber Monday is the heaviest sales period for online retail stocks.  The holiday falls on Monday November 26th in 2018, and is always the Monday of Thanksgiving weekend.

Amazon dominates the online retail sales space – capturing a whopping 49% of the total market!  This is massive.

Top 10 US Ecommerce Companies 2018

Top 10 US E commerce Companies 2018

Therefore, to capture the most amount of market share for Cyber Monday would be easiest by just buying Amazon.

The trade idea here is to purchase Amazon Inc in late October and sell it late December to early January at latest.

This trade idea can be realized through options trading strategies to maximize profit potential.

Because Amazon stock is trading over $1,700 USD currently, options trading will give you the most risk-adjusted return potential.


Want to Track the Retail Stocks Trade Live?

If you would like to follow this retail stocks opportunity in real time, our subscription packages here are a great next step.

Every subscription you choose comes with a daily email update, along with a weekly trade setups newsletter.  In addition, you receive access to our weekly live market analysis webinar.  This is a member favorite as it will help you prepare for the upcoming trading week.

I will see you in our trading community.

That is all for today, good luck and good trading.


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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.