Natural Gas in particular and energy sector in general has a seasonal tendencies to offer profitable trading opportunities in late January / early February. Stock Trader’s Almanac has done an analysis and found that AmEx Natural Gas index, $XNG, usually rises between February and June.
We have used our proprietary algorithm to find more profitable entry and exit points during this period. A portfolio of energy ETFs using this strategy produces an average return of 12.3% over a fourteen year span with an average of trade holding of 93 calendar days giving an annualized return is 41.5%
| Seq. | ETF | # of Trades | Win % | Avg. Return |
| 1 | ERX | 6 | 80% | 16.5% |
| 2 | OIH | 12 | 83% | 11.8% |
| 3 | PXI | 6 | 100% | 11.7% |
| 4 | PXJ | 8 | 88% | 14.3% |
| 5 | XES | 7 | 86% | 15.8% |
| 6 | XLE | 13 | 85% | 8.2% |
Once January rolls around, we start looking for entry signals. Since 2000, we have found 51 trading opportunities with 86.3% success rate. Not all ETF trades are triggered every year. For example, there were only four trades in 2013. This strategy produced profits in every year except 2012. 2008 was the best year with 27% average return per trade.
So far this year is also shaping up to be a good one. As of yesterday, March 18th, all trades are showing profit with average gain of 6.7%.
| ETF | Entry Date | Entry | 3/18 Close | Ret |
| XES | 24-Jan-14 | 41.17 | 44.10 | 7.1% |
| PXJ | 24-Jan-14 | 24.50 | 26.01 | 6.2% |
| XLE | 24-Jan-14 | 84.33 | 87.57 | 3.8% |
| ERX | 24-Jan-14 | 77.55 | 85.88 | 10.7% |
| PXI | 28-Jan-14 | 52.91 | 56.84 | 7.4% |
| OIH | 30-Jan-14 | 45.74 | 48.01 | 5.0% |
The exit period for these trades will start some time in later part of April. We will send alerts as and when exit signals are triggered.
