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A lot of traders are trying to figure out how to position themselves for this holiday-shortened week… 

Guess what happens most years during Thanksgiving week?

Bulls ram the markets higher into Wednesday’s close…

I scream at the Cowboys on television…

I play a little backyard ball with the boys.

And I enjoy a balanced breakfast to start the day.

Moving along, I’m about to share with you some amazing research that I not only explained to High Octane members last week…

But turned into a trade where I bought call options in the IWM.

What type of stats would give me that kind of confidence?

Let me show you eager traders.

Jeff’s gravy train setup

Working with one of Raging Bull’s research analysts, we pulled together some amazing data.

Key terms:

  • Win-rate: The total number of winning trades divided by the total number of trades
  • Profit factor: The total profits divided by total losses (both numbers are positive)
    • Profit factor of 1 means your profits equal your losses
    • Less than 1 means you lose more than you win
    • Greater than 1 means you win more than you lose

Setup rules:

  • Buy the ETF at the open the Friday morning the week before Thanksgiving
  • Sell the ETF at the close of Wednesday the day before Thanksgiving

Result based on 20 years:

  • Dow Jones (DIA) – 63.16% win-rate and 1.44 profit factor
  • Nasdaq 100 (QQQ) – 73.68% win-rate and 1.69 profit factor
  • Russell 2000 (IWM) – 84.21% win-rate and 3.24 profit factor
  • S&P 500 (SPY) – 68.42% win-rate and 1.71 profit factor
  • U.S. 20+ Year Treasuries (TLT) – 61.11% win-rate and 2.36 profit factor

Interpreting the data

Let me start by saying that any general day in the market (SPY) wins about 53.5% of the time with a profit factor slightly over 1.

And the data set we’re working with is small. So, I only like setups that show significant improvements over the baseline metrics across most of the indexes.

This data meets that criteria.

Now, this data suggests that markets are both bullish and tend to favor names more economically sensitive.

However, bonds tend to trade in the opposite direction of stocks. The fact that it’s so bullish here leads me to believe that there is just a lot of general buying into the holiday.

But it’s not as straightforward as you might expect.

When you run the same test buying on Monday of Thanksgiving week at the open and sell Wednesday at the close, the stats fall apart quickly.

While the IWM stands out as the favorite, the SPY and DIA see their profit factors drop well below one.

Now, I’m not going to just leave you with this and not give you a cool trade setup that you can use.

Let’s look at the Wednesday before Thanksgiving.

Jeff’s cranberry sauce setup

Setup rules:

  • Buy the ETF at the open the Wednesday morning the day before Thanksgiving
  • Sell the ETF at the close of Wednesday the day before Thanksgiving

Result based on 20 years:

  • Dow Jones (DIA) – 63.16% win-rate and 1.57 profit factor
  • Nasdaq 100 (QQQ) – 68.42% win-rate and 2.5 profit factor
  • Russell 2000 (IWM) – 63.16% win-rate and 3.16 profit factor
  • S&P 500 (SPY) – 63.16% win-rate and 2.38 profit factor
  • U.S. 20+ Year Treasuries (TLT) – 50.00% win-rate and 0.99 profit factor

Interpreting the data

Data suggests that win rates show strong returns the lower volume often leads to a strong float higher.

That means you earn more per dollar of risk on this trade.

The poor showing from treasuries gives me a little more confidence in this trade.

And here’s one last piece of data to get you going.

These are the results for trading black friday:

  • Dow Jones (DIA) – 52.63% win-rate and 2.24 profit factor
  • Nasdaq 100 (QQQ) – 68.42% win-rate and 2.37 profit factor
  • Russell 2000 (IWM) – 57.89% win-rate and 1.37 profit factor
  • S&P 500 (SPY) – 63.16% win-rate and 2.93 profit factor
  • U.S. 20+ Year Treasuries (TLT) – 38.89% win-rate and 0.79 profit factor

The low volume leads to a nice float higher and the win-rate is slightly better.

Make the most out of these trades

Statistics are all well and good.

But if you don’t know how to maximize your opportunities, then you are missing out on profit potential.

That’s why you need to check out my High Octane Options webinar right now and learn how I exploit money-making trade ideas just like the ones I just laid out.

Stocks I’m watching this week

ADBE, SHOP, ETSY, NOW, DOCU, AVLR, HUBS, DPZ, HYLN, CGC, TLRY, MJ, RIOT, WORK, WK, DE, AMZN, SFIX, PINS, IWM, QQQ, SPY, SPWR, JKS, TAN, SPOT, TTD, PENN, DKNG, LI, BABA, ECL

This Week’s Calendar

Monday, November 23rd

  • 9:45 AM EST –  November Markit Composite & Manufacturing ServicesFlash PMI 
  • Major Earnings: Warner Music Group Corp (WMG), Agilent Technologies Inc (A), Arrowhead Pharma Inc (ARWR), Nutanix Inc Cl A (NTNX), Twist Bioscience Corp (TWST), Urban Outfitters (URBN).

Tuesday, November 24th

  • 7:45 AM EST – ICSC Weekly Retail Sales
  • 9:00 AM EST – September Home Prices
  • 10:00 AM EST – November Consumer Confidence
  • 10:00 AM EST – November Richmond Fed Manufacturing
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: Analog Devices (ADI), Abercrombie & Fitch Co’A’ (ANF), Best Buy (BBY), Burlington Stores Inc (BURL), Chico’s Fas (CHS), Dick’s Sporting Goods (DKS), Dollar Tree Inc (DLTR), Eaton Vance Corp (EV), Hormel Foods Corp (HRL), Jacobs Engr Grp (J), Anaplan Inc (PLAN), Smucker (J.M.) (SJM), Autodesk, Inc (ADSK), American Eagle Outfitters Inc (AEO), Dell Tech Inc (DELL), Gap Inc (GPS), HP Inc (HPQ), Nordstrom Inc (JWN), Pure Storage Inc Cl A (PSTG), VMWARE Inc (VMW).

Wednesday, November 25th

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:30 AM EST – Q3 GDP 2nd Estimate
  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 8:30 AM EST – October Personal Consumption and Income
  • 8:30 AM EST – October Durable Goods
  • 10:00 AM EST – November University of Michigan Consumer Confidence
  • 10:00 AM EST – October New Home Sales
  • 10:30 AM EST – Weekly DOE Inventory Data
  • Major earnings: Deere (DE).

Thursday, November 26th – Markets closed for Thanksgiving

Friday, November 27th

  • 1:00 PM EST – Baker Hughes Rig Count
  • Major earnings: None of note.

 

Author:
Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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