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The Labor Day to Thanksgiving Retail Stocks Trade

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The Labor Day to Thanksgiving Retail Stocks Trade Explained

Retail Stocks

One of the more interesting stock trades on Wall Street is the Labor Day to Thanksgiving retail stocks trade.  In a nutshell, stocks of companies in retail businesses tend to rise ahead of Labor Day, as “back to school” buying kicks into high gear and continue to rise up until approximately Thanksgiving, as anticipation of the pending holiday retail season reaches a peak.

The Labor Day to Thanksgiving retail stocks trade is a pretty consistent trading pattern during normal market times.  Stock traders of all types can take advantage of this seasonal retail trade to make money via a number of retail stocks and funds.  This seasonal retail trade is worth learning about, even if you are just a casual or novice trader since it does not require a lot of oversight to partake in.  Trading the seasonal retail trade successfully just requires some patience, as it takes several months to play out.

How The Labor Day to Thanksgiving Retail Stocks Trade Works

MacysThe Labor Day to Thanksgiving retail stocks trade works by purchasing retail stocks or Exchange Trade Funds (ETFs) that focus on retail stocks before Labor Day, during the lazy summer trading days of August.  You then hold the retail stocks or funds throughout much of the fall until about Thanksgiving, when anticipation of the holiday retail sales season usually sends retail stocks to peaks.  The peaks usually occur just ahead of the heaviest shopping day of the year, which is the day after Thanksgiving; commonly referred to as “Black Friday”.  Sometimes, the Labor Day to Thanksgiving retail trade starts and ends earlier than expected, but if you stick to the August to Thanksgiving time frame, you will be well positioned to make money off retail stocks during years in which the stock market is rallying and the retail stocks fall trade works.

The following are some retails stocks that can be used to implement the Labor Day to Thanksgiving retail stocks trade.

  • Macy’s, Inc. (NYSE: M) operates stores and websites in the United States.  Its stores and websites sell a variety of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods.
  • Nordstrom, Inc. (NYSE: JWN) is a fashion specialty retailer that offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States.
  • Kohl’s Corporation (NYSE: KSS) operates department stores in the United States. It offers exclusive and national brand apparel, footwear, accessories, beauty, and soft home products to children, men, and women customers.
  • The TJX Companies, Inc. (NYSE:  TJX) operates as an off-price apparel and home fashions retailer in the United States and internationally. The company operates stores under several brand names, including T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx, and Sierra Trading Post.
  • J. C. Penney Company, Inc. (NYSE:  JCP) sells merchandise through department stores in the United States.

Keep in mind that individual retails stocks can be affected negatively by company-specific issues, and therefore, the safer way to trade retail stocks is by buying an ETF that spreads risk among numerous retails stocks.  The following are some ETFs to consider that focus on retail stocks.

  • SPDR S&P Retail ETF (NYSE:  XRT) seeks to provide investment results that correspond generally to the total return performance of an index derived from the retail segment of a United States total market composite index.
  • Market Vectors Retail ETF (NYSE:  RTH) seeks to replicate as closely as possible the price and yield performance of the Market Vectors United States Listed Retail 25 Index.
  • PowerShares Dynamic Retail ETF (NYSE:  PMR) seeks investment results that generally correspond to the price and yield of the Dynamic Retail Intellidex Index. The underlying intellidex was composed of common stocks of thirty United States retailers.
  • Direxion Daily Retail Bull 3X Shares (NYSE:  RETL) is a three times (3X) leveraged retail ETF the tracks the movement of the Russell 1000 Retail Index at rate of 300%.  This means that if the Russell 1000 Retail Index is up 1% on a given trading day, RETL should be up 3% during the same trading session.

The Risks Associated The Labor Day to Thanksgiving The Retail Stocks Trade

Black FridayAs is the case with any stock trading endeavor, the Labor Day to Thanksgiving retail stocks trade is not without risks.  The primary risk is that an overall downdraft in the economy or stock market could cause retail stocks to fall during the Labor Day to Thanksgiving time period.  This is particularly concerning since the month of September, on average, has the worst stock market returns, and because some of the worst stock market sell-offs ever have occurred during the months of September and October.  For this reason, the Labor Day to Thanksgiving retail stocks trade should be done with only a small portion of a trading account.  Also, it is wise to engage in the Labor Day to Thanksgiving retail stocks trade when the markets are relatively healthy, and excessive speculation has not caused stock prices to reach high valuations.

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