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Seasonal Trade Opportunity in Gasoline


Gasoline futures typically do poorly in September. Over the last 12 years, gasoline futures (RB) have only moved higher in September only a couple of times...and have dropped in September the rest of the time.

Figure 1. Percentage of the Time Gasoline Has Risen in a Given Month (Last 12 Years)

Source: StockCharts.com

Over the last 15 years the results are the same, providing a compelling trading opportunity in Gasoline futures.

Sell March 2017 gasoline on Friday September 2 (or in that area...see example trade level below). The goal is to capture most of the weakness that develops throughout September. The exit should be around September 23, but if the price is still moving lower, exit by September 29.

October isn't a good month for Gasoline either. As can be seen in the chart above, over the last 12 years it is has only rallied in October four times out of twelve, and the price has typically dropped about 5.5%...more than the 4.5% typical decline in August. So holding a short trade through October, if a downtrend is intact, is also feasible.

Figure 2. March 2017 Gasoline Daily Chart

Seasonality patterns should be combined with another strategy which employs a stop loss and more precise entry point.  For example, a short entry may occur on a drop below the August 30 intraday low of 1.3887, with a stop loss above the August 19 high of 1.4474 on the March contract. Since the price typically falls about 4.5% in September, a profit target area is just above 1.33. A more aggressive target is the support area near 1.24, although that is a longer-term target.

Seasonality is a historical tendency, and doesn't tell you what will happen this year. August is also typically a weak month, but in 2016 gasoline futures rallied aggressively through much of August. Seasonality is just a tool, and should be combined with other forms of analysis.

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