Trading Roundup: Understanding Black Friday in Stock Market Context

November 24, 2017 12:45

Black Friday has been traditionally celebrated on the day after Thanksgiving since 1952 and is mainly associated with shopping and retail fever. The influential U.S. setting the trend, retailers around the globe now increasingly mark the day with crazy deals.

Black Friday from a Trading Perspective

Active spending moves the markets, including the stock market. According to the research conducted by National Retail Federation, this year's holiday sales have the potential to increase by 3.6 - 4.00%, and shoppers are believed to spend up to $682 billion. In the view of the potential consumer spendings, economic activity is expected to be driven.

How good or bad is it for the stock market? Equally important, are we looking at long-term or short-term effects?

Black Friday could be considered an indicator of the overall economic health of the company that affects its position in the stock market. We'll elaborate. Given that consumers spend a considerable amount of money on the company's products or services and that the company shows confident numbers, the stock market assumes the company's profitability. However, the above-mentioned is rather true for the now-moment, i.e. the short-term perspective, as the long-term effects of Black Friday are yet to be proven. The fact is, the long-term effects arise from a whole set of factors we're not going to focus on right now.

Instead, our advice would be to keep your eyes wide open in the upcoming weeks, as the market is most likely to rise. This is a time when you can potentially benefit from short positions, but don't lose your mind and rush into making too many trades. Remember that proper risk management is your priority.

Let's Take a Closer Look

For retailers, Black Friday might be the biggest holiday of the year. Adding to that claim, I might also say that trading volumes tend to be higher in the week before the holiday, and companies such as Amazon (#AMZN) have seen a big boost in both volatility and share price.

Source: #AMZN H4 Chart, Admiral Markets MT4, MT4 Supreme Edition Plugin, Jun-Nov 2017

Price is having a very strong momentum push to the upside. We can also spot a huge gap between two higher time frame Camarilla levels. However, a drop in the share price to the POC zone 1058.44-1089.94 (M L1-L3 Camarilla pivot, EMA89, 50.0 fib, order block) might be used for potential buying. Additionally, there is a huge bullish order block there that could be re-tested. However, if we see a strong H4 or daily close above M H3 – monthly Camarilla pivot resistance 1152.94, the price could go to M H4 – 1200.20 directly with a potential to reach even 1305.50.

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