Rarely does a price chart line up with historical seasonality as nicely as UNG's. Plus, updates on our current positions in YINN, FXC, FXY, MOS, AAPL and NVDA.
Hey, everybody! Really quick note that my April Monthly Game Plan is in the works; I'd planned to record it this week, but I had some disruptions to my schedule. Look for that on Monday evening.
In that video report I'll be answering some mailbag questions, so also make sure to submit any questions/comments you have to tradecycles@tradesmith.com this week, before I do that update for you.
Now, let me tell you about a new trade idea in natural gas that I'm very excited about – because the setup looks so nice. Afterward, we'll check up on our positions in this week's Weekly Update.
New Trade: United States Natural Gas Fund (UNG)
Commodities are very, very cyclical. So, although you have to take a lot into account when using seasonality with equities, often with commodities you can just count on the seasonality itself as the main point of analysis.
And rarely do I see a current year's price matching up so nicely with the historical average.
Take a look at the United States Natural Gas Fund (UNG) in our TradeSmith Seasonality tool below. The blue line is the current year, and the green line is the 15-year average – look how beautifully they match up. Almost as if they're 1-to-1:
As the Seasonality tool gets better and better, we can now select our own custom dates on the chart: here, I picked April 3 - May 18. Here are the stats on this seasonal window: UNG has gone up 64.3% of the time from April 3 to May 18 in the past 15 years, averaging a 7.3% gain.
And looking at our Trade Cycles algorithm as well, you can see that UNG is in a Valley, poised to move up into the next Peak which is from March 10 to June 14 – right in our seasonal window for this trade.
To get more data on this trend (going back 32 years), I have to look at the actual natural gas futures contract (NG), and you can see below that the current year matches up very well with the 32-year trend:
And the stats over that longer period of time get even better. The futures contract has gone up 70% of the time between April 2 and June 15 in the past 32 years, averaging a 10.3% gain.
Interestingly, on the 32-year average the seasonal pattern tops out on June 15. And remember, UNG's next Peak lasts until June 14.
So, everything is matching up wonderfully for a long on natural gas.
Now let's check the chart. This is exactly what I want to see.
Since 2012, this has been the price range of the natural gas futures contract (NG):
Source: TradingView
If I'm going to go long on something, I'd prefer to do it at a point of previous support where the price has touched and reversed from before. I've marked those points in red.
Not only is that the case right now, but at each of those other large reversal points – guess what each of those price-range lows have in common? The month.
They were all trading at that level in early April... and that was right before they jumped big.
This is looking like a real no-brainer, slapped-in-the-face trade if I ever saw one.
Two Ways to Trade UNG
Here's what to do when the market opens tomorrow:
BUY THE STOCK OUTRIGHT: Buy shares of UNG at market on Thursday, April 4. And/or:
OPTIONS TRADE: Buy to open the UNG Oct. 18, 2024 $15 calls.
With that covered, let's go over our current positions.
That's it for today. Don't forget to check your inbox on Monday for the Monthly Game Plan video report! And remember to send in any questions to tradecycles@tradesmith.com before the weekend so I can include them in the video.
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