About 90 days from now, we’ll be in the middle of the 2025 holiday season.
Yet, retailers are already launching early holiday sales, as millions of people start shopping early ahead of the rush. And, according to CBS News, about half of Americans plan to start holding shopping early. In fact, according to CBS News, “49% of holiday shoppers plan to start buying gifts before Halloween.”
So, what’s the best way to trade the holiday sales kickoff?
Here are three ideas you may want to consider.
Amazon (AMZN)
In most years, Amazon is a no-brainer stock to buy and hold for the holiday rush. In fact, with the exception of 2022, the ecommerce giant has historically pushed higher heading into the holidays, which we expect to happen again this year.
Plus, according to Salesforce, online spending for the holidays is expected to jump 2.1% to $288 billion. While that’s slower that the 4% jump we saw last year, it’s still a healthy number. In addition, recent earnings have also been strong. In its second quarter, EPS of $1.68 beat by 35 cents. Revenue of $167.7 billion, up 13.3% year over year, beat by $5.59 billion.
Amplify Online Retail ETF (IBUY)
With an expense ratio of 0.65%, the Amplify Online Retail ETF (SYM: IBUY) should benefit from an expected surge in e-commerce spending, especially with holdings in Affirm Holdings (SYM: AFRM), Amazon (SYM: AMZN), BigCommerce Holdings (SYM: BIGC), Apple (SYM: AAPL) and Netflix (SYM: NFLX) – a few heavyweights on the list.
The ETF tracks the EQM Online Retail Index, whose holdings derive at least 70% of revenues, or a minimum of $100 billion in annual sales from online and/or virtual sales.
Risk is the area of trading that we have the greatest amount of control. Consequently, what we should try to do is equalize the risk on each trade. We can only make educated guesses as to which trades should be the big winners, but if we risk approximately the same amount on each trade, then we should have an adequate number of contracts on when the big trade presents itself. We can accomplish this by simply choosing a number between 0 and 100 and risking that percentage on every trade.
Let’s assume you have a $20,000 trading account, and you have determined you are comfortable with risking 10% per trade. Multiplying $20,000 by .10 (10%) gives you $2,000. This is the amount you can risk on a trade. Now, let’s say you are trading a 3 minute S&P 500 chart and are using twice the average true range as your stop point. If the average true range is 35 points, that means a 70 point stop, or risk of $350, since each S&P point is worth $5. You would then divide $2,000 (the amount you can risk) by $350 (the amount or risk in this trade) – 2000 divided by 350 is 5.7143857. It is not necessary to take your calculation out to any decimals places since you can’t trade partial contracts. You merely truncate off the decimal part, and you are left with 5, which is the number of contracts you can trade.
It is important that you understand you DO NOT ROUND your answer. You only pay attention to the whole number and eliminate the decimals. In other words, you always round the answer DOWN to the whole number. If say, you had the $20,000 account and the same S&P trade set up, but you only wanted to risk 5% per trade, here is how it would work: 5% of $20,000 is 20000 multiplied by .05 or $1,000. Your risk is $350, so you divide 1000 by 350, which is 2.857. Even though the answer is almost 3, you round down to the nearest whole number, which means you can trade 2 contracts.
I have had a few subscribers ask how the list is compiled and what it means when a stock candidate is either added or removed from the list.
During the week, 100s of charts are sorted through and watched each day. They are grouped based on what it is taking place; some are in the early stages of forming P3 squeezes, and others are forming P3½ patterns. I try to list them ahead of a Sweet Spot confirmation buy signal. Remember that often one pattern leads to the next.
So, as a P3 is playing out, I have it on my radar as a possible P3½. This said, because a symbol gets dropped from the list doesn't mean that you should exit a trade on that symbol. Or, if it should appear on the P3 list, when you are in a P3½ trade on that symbol, it doesn't mean you should close your short trade. Close your trade when it gives exit signals.
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