Which Stocks are profitable in Santa Claus Rally 2021?

Santa Claus Rally is creating a buzz around the financial market. Santa Claus is not only making the kids jolly but also bringing a lot of positive hopes among traders. Be it young, sophomore or expert traders, everyone want to make profit out of it.

We have gone through to various trading analysts and experts to get their opinion about what exactly is a Santa Claus Rally 2021 and instruments likely to see profits. So, let’s start with

What is a Santa Claus Rally?

A Santa Claus Rally is a trading phenomenon which occurs in the last five trading days of December and two initial trading days of January.

There are several factors for the cause of Santa Claus Trading Rally:

• Christmas festive season and feeling of optimism.
• Promotion events and offers by various companies.
• Tax considerations.
• An optimistic wave and enthusiasm across wall street.

However, there is another general theory:

Big traders tend to go on vacation currently, it causes that market open to retail investors, who tend to be more bullish.

Historical Overview of Santa Rally

In 1970, a stock market analyst noticed a pattern of good returns between first trading session after December 25 and first two trading sessions of January.

Although, past results are only helpful in speculations, but it does not guarantee absolute returns. However, the data of the Santa Claus Rally seems to support the pattern frequently.

Which financial instrument give good returns?

• Google
• Amazon
• Tesla
• Facebook
• S&P 500
• NASDAQ

Based on historical data, December month has been the strongest month for stock returns. In terms of frequency, 79% of the time, Santa Claus Rally has been generating positive returns. In December only, the stocks have returned an average of 2.3% since 1936.

However, these patterns don’t guarantee a sure shot positive return every time in December. For example, December 2018, S&P dropped during Santa Claus rally.

According to expert market analysts, The Christmas season has yielded positive returns to the investors in 34 of the past 45 holidays. The average cumulative return of trading in Santa Claus Rally is 1.4%, and these returns are mostly good in each of the seven days of the rally.

However, officially there is no vivid theory that can explains the phenomena, but past records shows that this rally brings profit for investors and traders.

Pros and Cons

Pros

• The Cyclical trend find its ways to repeat the same pattern on Santa Claus Rally.
• Santa Claus rally limits the risk factor as there prevails optimism in the market.
• New investors and traders tend to join the rally as they find it exclusive and rewards.
• Speculators can predict better patterns in particular indexes and carefully determine their entry and exist points.
• Amateur investors can manage risk for short time frames.

Cons

• Traders without experience of managing risk cannot gain much.
• For long term investors, this is just another popular theory which is in trend.
• This rally does not suit the long-term strategies of the investors.
• People tend to get more bullish or bear during this rally which changes their natural pattern of trading.
• It is a matter of chance, not a vivid proof so those who make long term strategy based on Santa Claus Rally cannot get much advantage.

Will There Be a Santa Claus Rally in 2021?

The Santa Claus rally occurs during the last five trading days of December and the first two trading sessions of January. Though historical statistics show that higher market returns tend to occur often during these periods, there is no absolute formula to predict if or when that will happen again.

However, the consensus of traders is dominantly positive about the Santa Claus rally. It gives them the chance to get good returns within short period of time.

Where to Invest and Trade during Santa Claus Rally 2021?

You can trade all the financial commodities like trade Forex, CFds shares and Indices, through a reliable financial service provider. For instance, you can trade stocks with CapitalXtend during 2021 Santa Rally as it provides a hassle-free atmosphere and exceptional support to tackle all your trading situations.