How You Can Play the Santa Claus Rally for Huge Gains

The financial press has struck out covering the Christmas stock market rally. It’s time for you to cash in, and I’ll tell you specifically how below.

But first, I want all of you 10-Minute Millionaires to take your final profits on your AAPL Jan 3, 2020 $267.50 calls (AAPL200103C00267500) that I recommended earlier this month. We’ve already hit our first profit target, and I told you to hold the second half of your call options for even bigger gains. Well, those gains are here.

Depending on when your bought your AAPL calls, they are up 200 – 425%! There’s two ways to play this:

  1. Take those huge profits now for a great holiday treat
  2. Hang of for even more profits, selling no later than Jan 3rd in the early afternoon.

Either way you play it, what a great way to close out the year! Let me know how you did on this trade in the comments section below.

I hope you’re enjoying your holiday season. The Bartons had a busy and fun time. Last weekend we loaded my adult children and their boyfriends and girlfriends into a rental van and took a family trip to visit my Dad. The six and a half hour trip together each way was part of the fun.

For Christmas Eve, we enjoyed church service with my wife leading the praise and worship band – she even recruited me to fill in on drums. Then back to the house for a relaxing evening of conversation and a Christmas movie or two.

Regardless of your spiritual tradition, I hope that you enjoyed the company and love of family and friends as well.

As I said above, the Christmas-time Santa Clause Rally has been poorly covered in the business media this year. The gap between that coverage and the reality of how good this seasonal indicator has been gives us a great opportunity for profits heading into the New Year.

Let me explain…

The REAL Santa Claus Rally – Why and How You Should Trade It This Year

Last year, Christmas was an emotional rollercoaster for traders.

In the weeks leading up to Christmas Eve, markets fell almost 20%. It had many traders recalling this short ditty:

“If Santa Claus should fail to call,

Bears may come to Broad & Wall”

-Old Wall Street saying, unattributed

But then, the tide turned quickly. The S&P 500 rose more than 10% from December 26, 2018, to January 9, 2019.

It was a “Santa Claus rally” to remember.

So this year, to keep you reading and watching, financial news websites and TV shows kept warning that there would be no Santa Claus rally this year.

Except when they said, “Santa Claus rally,” they were talking about the time before Christmas.

If they want to define it that way, that’s their prerogative.

But the term was originally created by the Hirsch family’s Stock Trader’s Almanac, a collection of old Wall Street wisdom founded in 1967.

As they define it, the Santa Claus rally is the last five trading days of the old year, and the first two trading days of the new year.

Since 1969, this seven-day period has returned positive results in 36 out of 49 years for a 73.5% win rate and an average gain of 1.3%. Looking back another 20 years shows that the seasonal move holds up, with a similar percentage of wins and gains.

What we have here is what I call a “reality gap.” It’s a well-established fact that markets tend to do very well after Christmas and leading into the New Year, but no one is talking about it.

In fact, markets are rising with China trade talks looking up, and strong consumer confidence driving record retail sales. As I’m writing this, I’m already sitting on some very profitable trades.

And yet there’s barely a whisper to be found about this, the real Santa Claus rally, in the financial news.

So, here’s how you can profit from it…

The Two Reasons Why Santa Claus Gets Traders So Excited

As an engineer, I like to take things apart and see what makes them tick. Part of it is curiosity, yes, but it’s also about trust.

I like to know how and why things work, so I can predict what they’ll do next.

This is especially crucial when trading.

I wouldn’t trade a seasonal anomaly like this Santa Claus rally unless I had some idea of why it happens. Otherwise, I couldn’t be confident that it would keep happening.

But we don’t have to go far to look for the reasons for why markets tend to rise after Christmas.

The first reason is simple psychology. Here in the U.S., the holiday season is by far the most optimistic and jolly time of year. Whether you celebrate Christmas, Hanukkah, something else, or nothing at all, it’s very hard not to get swept up in the holiday cheer.

Traders and investors are no different. And about a week later comes New Year, a near-universal celebration in the Western World, no matter your religious beliefs.

Combined, it makes for a potent mixture of good feeling and optimism that sends traders and investors buying.

The second reason for the annual Santa Claus rally is more hard-nosed. The time after Christmas is when funds start their annual “window dressing.”

With so few trading days left in the year, it’s pretty clear what the best-performing stocks of the year have been. So this is the time that fund managers start buying up these stocks, just to make sure they can tell their clients that they owned the best stocks of the year in their annual report.

This will push up already well-performing stocks even higher.

Then, once the New Year comes in, those same funds get an influx of new money to spend. That means they go on another shopping spree for stocks, giving the markets even more upward momentum.

And this year, traders got the extra good news that online holiday sales here in America hit a new record high, growing by 18.8% from last year.

Put it all together, and you get a great recipe for end-of-year trading.

Especially for the leader in the online retail space, Inc. (AMZN). So you can play this two ways. I like buying AMZN shares or call options here. Or, for a more conservative play, buy steady Microsoft (MSFT) shares or call options and ride them into the New Year.

Either way you play it, Santa should follow through with some extra profits to stuff in your stocking this year.

Great trading and God bless you,

D. R.

5 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
4 Comment authors
newest oldest most voted
Notify of
Ron Andronica

It would be more helpful if you included target prices for the rally

Anthony Voyias

Thank you d.r. you are always clear and concise. But most of all you are honest authentic and sincere!
God bless! 🙂

Randy Dijkhoff

I am with my mouth open ! I did not expect it.Congratulations to Tom and you, Mr. BArton. Ian is authorized to touch my money in case I am sick and not reachable.$ 240 K he should hand to mr. Ward or you.

Randy Dijkhoff

Thank you Mr. Barton and Tom,
This is a big surprise. Congratulations

Gerald Heath

Thank you D.R. Barton, I got into the AAPL 267.50 option at 4.75 on 12/5/19 and closed it out this morning at at the open for 29.11, a great profit of $2436.75 513%. I am new to options and only had one and wish I would have had more, but am as happy as I can be!! Merry Christmas and Happy New Year to you and Tom.

View this page online: