A Stocking Full of Nuggets

I'm making a list and checking it twice, but it's not to find out if you're naughty or nice. After all, traders need to be naughty at times, especially when they're taking other people's money.

We're heading into year-end at light speed, so I've put together a seasonal list for traders to review before the crowd returns in January. These diverse topics are too small to place under the trading tree, so I've made a stocking stuffer for you to dig into during this much-needed winter break.

Gimmie a Break

Are you even taking a break right now? Thin volume can make holiday trading a hazardous enterprise, but someone will be making money this week. It could be you, as long as you take the time to do it right. The most important thing to remember is staying liquid. No, this isn't a prescription for your office party hangover. If you trade through the holidays, pick stocks that attract unusual volume.

Find stocks that trade above their pre-holiday volume by getting up early and checking the breaking financial news. Of course, there are fewer market movers over the holiday, so you have to look harder to find them. Keep in mind that other traders with just as much free time on their hands will be looking for the same thing. The idea is to find each other early and take advantage of the late sleepers. The holidays will trigger very large price moves when the news is big enough and the crowd can find the play.

Hold On

You know all about tax selling and how it influences the market this time of year. But have you heard about tax holding? Traders and investors hang on to big gainers until Jan. 1 to avoid capital gains taxes. This contributes to an early new year selloff in stocks near their 52-week highs.

You can play this phenomenon in two ways. First, those with strong stomachs and deep pockets can sell these stocks short on the last trading day of the year. Too afraid of holding risky positions that might affect your New Year's party attitude? Then wait for January, let the stocks sell off for a few days, and buy them back at lower price levels. But don't stick around too long, because winners in one year tend to underperform the market the following year.

Still stuck because you don't know how to find these interesting seasonal plays? No problem: Just check back next Monday, when I'll have a tax-hold list ready to go.

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