Don’t Be a Turkey: High Risk Trading Ahead This Week

Jeff Macke

Turkey, parade floats, football, crazed shoppers, too much family and a huge stock market rally that catches almost everyone napping. If this Thanksgiving week is like the last two the stage is set for one last burst of year-end volatility. The trick for traders is making a firm decision on where they want to be for the week then sticking with it.

The news flow for the week is all but set in stone. We're going to hear about questionable holiday sales volume. There will be footage of shoppers storming into stores for Black Friday bargains. Questions will be raised about whether or not the politicians are really being conciliatory enough to strike a meaningful bargain on the Fiscal Cliff.

None of it will seem to "matter" but the stock market will start pricing it in, regardless.

Last year we had much the same problem. A pre-holiday slide and questions a out the efficacy of the President's debt ceiling committee had the whole world seemingly leaning short into Turkey Day. All that happened then was a Black Friday rally that led to a 7% gain in less than five trading days.

In the attached video Nesto notes the historical strength of markets in the three weeks beginning last week. Materials (XLB), energy (XLE), financials (XLF) and telecom (XTL) are the winners with the groups gaining an average of at least 4.50% in each of the last 10 years, according to Jonathan Krinsky of Miller Tabak. It's worth noting that those groups have been bludgeoned heading into the shortened week this year.

I'm looking more stock specific. Best Buy (BBY) in particular could end up being a poster-boy stock for the week. There's nothing to recommend the name other than the fact that the stock is down more than 40% year-to-date and will be a spot-light company. If you're looking for dead-cat bounces Best Buy may provide one-stop shopping.

Bottom line is this: don't let the tryptophan laden turkey lull you to sleep this week. Opportunity abounds for those who are engaged and danger lurks for the idle. In the holiday season you're either on the couch or in the kitchen. Those stuck in the middle could be in trouble.

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