Seasonality in Energy

Rightly or wrongly, I have been keeping myself from buying Energy stocks over the last several weeks even though XLE is in a pure daily chart uptrend. XLE is as overbought (by distance from the SMA 50 and by RSI) as it was in May just before it began a significant correction. That does not mean it will correct like that again this time, but it does mean that I don’t want to buy here if I have failed to do so all along the latest up leg.

The other reason is that the seasonal averages for oil and gas are negative. I look at the chart of oil and I want to buy USO. I look at the risk taken out of NatGas and I want to buy related stocks, including coal play BTU. Instead, I just wait (though tempted about USO).

It is only one factor among several to be considered, but seasonality is negative. Oil is in a seasonally weak period. It’s fact. It’s the history of what has been, on average.

crude oil seasonal

Gas turns seasonally weak right now (through February).

natural gas seasonal

Of course, the proof that seasonal averages do not necessarily play out in any given year is in the fact that Gas has already been correcting for 2 months now while the seasonal says it starts 1st week of November. Oil has been correcting since June while its seasonal did not begin to correct until September.

What to make of it? Nothing major. The seasonal average correlations are already broken and I am looking at USO, trying to decide whether to buy its daily chart pattern, which sure does look constructive to me, or respect its negative seasonal. So I thought I’d illustrate some of this stuff for you as well.