Many might think the stock market rally is over after November’s historic move. The reality is that many stocks are setting up for December’s holiday euphoria…
Santa Claus is coming to town!
Wall Street is ready with fingers and mice. Traders should be ready, too. Here’s how…
Build a watchlist of stocks and sectors.
Look for ones you believe have upward potential in the last few weeks of December.
I like to start with a review of the 11 S&P 500 sectors using ETFs. The complete list of sector ETFs includes:
- Technology (XLK).
- Communication Services (XLC).
- Consumer Discretionary (XLY).
- Health Care (XLV).
- Financial (XLF).
- Basic Materials (XLB).
- Industrials (XLI).
- Consumer Staples (XLP).
- Utilities (XLU).
- Energy (XLE).
- Real Estate (XLRE).
Now I’ll go over just a few to give you an idea…
Since this sector has made all the headlines this year, let’s take a look at XLK.
Start by projecting potential future direction using technical analysis. Based on a simple review of the chart, this ticker looks ready for a bounce off support in the next week. That gives us time to pick the juiciest technology stocks.
Taking a closer look at the Nov. 13 time frame, notice how XLK completely ignored the resistance line set in place during July — that’s strong (bullish).
This sector has been hated by doom and gloomers convinced of massive future layoffs. While some sectors will likely fall into this camp, others can’t match product demand with the few employees they have.
Instead of listening to headlines, take a look at your favorite type of analysis to project a potential future in price action.
Using basic support and resistance, this sector is up against August price action resistance. The next resistance area is July.
It will be interesting to see if XLI pauses at August resistance in the days ahead, or if it blasts through it like XLK did. Either way, the sector looks to be storing up energy for the last half of December.
Since most people will enjoy the holidays by consuming an extra dose of cheer, let’s take a quick look at health care.
Some will temporarily put aside some major health restrictions… others will put off weight-loss goals until the new year.
The key to this sector is finding the strongest stocks within — it’s all about the individual company. Volatility can be extreme in some, while certain others show a steady pattern of increased value over time.
Similar to XLI, it will be interesting to see if XLV busts through October resistance. Given that XLV has not broken through yet, that leads many to believe that the sector is not strong.
In my opinion, many great companies would be overlooked if traders and investors passed by this sector before taking a look at the companies underneath.
Regardless of our opinions, make a projection of the potential future price action as a basis for your trading decisions.
It’s all about the consumer during the holiday season. One easy way to understand how much the consumer is participating in Christmas is to look at the sector at Consumer Discretionary (XLY).
This ETF and the companies included will capture most of the retail patterns of the holiday consumer this year.
Look for other stocks in other sectors that will also give insight.
The Ultimate Christmas Wish List
As you go through this process, build a diverse list. Not all stocks or sectors will perform well, so avoid going all in on one theme.
Here’s a fun list of stocks to start with. Note how they align with the above sector patterns to give you an idea of potential holiday price action.
- Etsy Inc. (Nasdaq: ETSY).
- Five Below Inc. (Nasdaq: FIVE).
- Costco Wholesale Corp. (Nasdaq: COST).
- Emerson Electric Co. (NYSE: EMR).
- Apple Inc. (Nasdaq: AAPL).
As a final note, leave any market bias outside in the cold before heading to the mistletoe.
Think and win!
Celeste Lindman Trading
If you haven’t already, join my Telegram channel here for frequent trading insights and market musings!
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
P.S. There’s a Mysterious ‘Dark Force’ That Controls Where Stocks Are Heading Next
There’s an “invisible hand” that can control where any stock is heading next.
It doesn’t show up on a stock’s chart…or on the balance sheet.
It’s nowhere to be found when you look at the fundamentals…
And it’s completely undetected by commonly used valuation metrics.
Unless you’re on the inside… working for one of the top firms… or on Wall Street…
You’d have a hard time knowing it even exists.
But once you can see this “invisible hand” for yourself… And how it can completely control a stock’s every move…