With Thanksgiving nigh, CNBC’s Jim Cramer on Monday revealed a seasonal pattern that investors can consider playing leading into the Christmas holiday.
The closing months of each year are defined by the holiday shopping rush, and Cramer expects the close of 2020 will be no different, despite the coronavirus pandemic.
He recommended market participants play the Thanksgiving trade by exposing their portfolio to retail.
“The charts, as interpreted by the legendary Larry Williams, suggest that retail tends to roar every year from Thanksgiving through Christmas, and this year he recommends loading up on the retailers with the most digital exposure,” the “Mad Money” host said.
Cramer last presented a seasonal trade from Williams, whose storied trading career spans more than five decades, in July. In June, Williams forecast that the S&P 500, as it has years prior, would experience a “Fourth of July trade.” While the technical analyst recommended buying the broad index two days prior to Independence Day, the S&P 500 in fact rallied more than 170 points between June 29 and July 6, advancing 5.7% across a five-day winning streak.
“Larry Williams says we’re about to have a month-long retail rally from Thanksgiving through Christmas but we should expect the holiday season to be dominated by online retail,” Cramer said.
Given the U.S. and global response to the health crisis, many retail businesses were a casualty, though others, particularly essential retailers, were able to thrive in the environment.
Cramer, reviewing chart analysis from Williams, pointed out four leading retailers that fit the theme: Amazon, Walmart, Apple and Home Depot. The common denominator for each company is their investments in building out their online capabilities to reach consumers, which has proven fruitful in a pandemic world, he said.
Costco, though it does not have much in the way of a digital presence, is another essential retailer that Cramer has conviction in, given that it’s considered an essential retailer.
“Considering how well his Fourth of July trade worked out,” Cramer said of Williams, “I bet he’s going to be right about the Thanksgiving trade.”
Disclosure: Cramer’s charitable trust owns shares of Walmart, Costco, Amazon and Apple.