Readers of this blog have posted a couple of enquiries about Natural Gas, and the Mining stock sector. Both are in their favorable seasonal period until the spring (Nat Gas until June, and Mining until May). Both are performing poorly. These trades illustrate why its imperative to incorporate classic technical analysis into seasonal analysis. Seasonal tendencies are tendencies, not absolutes. Let’s take a quick look at the charts of Gas and Mining.
The global mining index is in a major downtrend – as illustrated by the peak/tough levels – which continue to make significantly lower lows and lower highs on the chart above. It could be argued that the December 2014 low on the chart was in line with the mid-2013 low – but my green horizontal support line does suggest that it was in fact a lower low. Given a poor chart, and a soon-to-be-over seasonal period, I would avoid the mining sector. As always, the question you should ask when reviewing a stock chart is: Why would I own this, when there are better opportunities elsewhere?
UNG (US Gas Fund – below) broke 3-year support at $14.50-ish recently, then recently took out near termed support at $13. Seasonal tendencies for strength or not, this chart looks abysmal. If you like the idea of a high risk, low probability trade, this one’s for you. However, if you like the idea of a lower risk, higher probability trade, there are better opportunities elsewhere.
This Thursday: Community talk on technical analysis with Keith Richards at Richmond Hill Central Library
1 Atkinson St, Richmond Hill, Ontario this Thursday April 16th 7:00PM
Keith will be speaking on how to “Win by not losing”: Using the power of technical analysis to profit in uncertain markets.
Keith on BNN Market Call next Monday April 20, 2015 at 6:00 PM
Tune in to BNN Monday April 20th to catch me live on BNN’s 6:00 pm call-in show.
You can email questions now to [email protected] – (specify they are for Keith) or you can call in with questions during the show’s live taping between 6:00 and 7:00pm. The toll free number for questions is 1 855 326 6266
In one of your articles in a newsletter I receive you suggest building a strong cash position by selling higher Beta stocks. I know what the beta ration is but I do not know of a data service that provides this information. Any suggestions?
TSX website has beta’s somewhere in their site. I get my beta’s from Thomson Reuters, but that’s a subscription service.
Commons sense also tells you roughly what the beta is–if a stock has displayed strong movements both up and down with market direction – its likely a high beta candidate.
For example–we just sold the small-capped sector ETF, its beta is 1.2. More importantly, you and I both know that small caps are more volatile than the large caps–so even if you don’t know the beta, you know that sector is higher risk if the market backs off.