The Case for Natural Gas in February

Okay, I’m not going to miss the boat on this trade.  So, check these averages for buying Natural Gas in February, as listed in the 2012 Stock Trader’s Almanac:

I don’t normally use the Stock Trader’s Almanac, but an old coworker put me onto it about 5-6 years ago.  The biggest thing that I took away from the Almanac is the seasonality / cyclical trends.  Basically, the idea is that certain sectors do better than other sectors during the year.  Some traders use these seasonality trends as their trading system.  Like all trading systems, there is nothing that is ever certain, but the odds say that trading the system makes you money.

So, what the chart above says is that if you went long Natural Gas on or near the end (E) of February, and sold in beginning (B) of June, then you would’ve net 19.2% over the past 15 years, 14.4% over the past 10 years, and 18.3% over the past 5 years.  Holy F?  And if you would’ve short Natural Gas in the middle of June and covered at the end of July, then the average gains were 8.8%, 10.0%, and 8.4% respectively.

Now, I don’t know about you, but those average are pretty sick.  I went back 3 years, because UNG is a fairly new ETF and sure enough, even though we’ve been in a downtrend, going long in Feb and selling June, and going short in June, and covering in July, would’ve been golden 5 out of 6 times over the past 3 years.  I’ve been following UNG and Natural Gas for what seems like years now.  Here’s the current weekly chart:

Yes, the chart is absolutely hideous, but there is money to be made…I think.  I’ve already purchased 500 shares of UNG yesterday, but I think I may have entered prematurely, like usual.  My goal is to get 4000-5000 shares of UNG some time over the next month.  Scaling in is probably the best option.  Looking at the historical data, it seems as though getting in a few days before the end of Feb is the best.

Anyways, I’ll be watching this trade over the next month to see how it develops.  If I have to buy at higher prices, then I will.  I gotta play the odds, and in this case, the odds say that I’ll be a winner in the long run.  Obviously, the entry and exit points are subjective, so the results may differ based on when the entry point.  If I were smart, I could probably tweak the stats and find out which day offered the best results.  I think the better option is to watch RSI or some similar indicator to find an entry point.  Along with scaling in, this should reduce the odds of error.