The Best Seasonal Trades

By: George Angell

The following is an excerpt from George Angell's The Money Secret

Seasonal trades are based on the tendency of some markets to rise and fall during specific times during the year.  Seasonal trades are easy in the sense that you only need to buy or sell one futures contract – hence, the complexity of the trading is decreased.  There are many, many seasonal trend patterns.  Moreover, there are key patterns that need to manifest themselves around certain holidays such as the stock market’s tendency to go up just prior to Christmas.

Originally, the notion of seasonal trading was based on the harvesting and processing patterns of agricultural commodities.  But, in more recent years, analysts have discovered that even financial instruments demonstrate viable seasonal patterns.  While far from a sure-fire method of trading futures contracts, “seasonals” are another weapon in the trader’s arsenal.

Copper

The trading rule is: Buy Copper during January, February or March.

The tendency for Copper prices to rise early in the year is a high as 75 percent, with February being the month most likely to experience a price increase.  On a seasonal basis, Copper prices, like so many futures, tend to rise in two distinct legs.  The first leg corresponds to the first quarter of the calendar, with profit-taking temporarily pushing prices lower prior to a sustained rally into the late summer and culminating after Labor Day.  Thus, for a long-term trade, one in which you might even want to “roll” the Copper position from month-to-month, look to purchase during January and sell after Labor Day during years when this market makes sustained rallies.

Wheat

The trading rule is: Sell wheat early in the year to take profits at the mid-summer lows in July or August.

As a traditional seasonal commodity, wheat tends to decline in price as the harvest season brings large supplies to market in mid-summer.  The seasonal tendency for wheat to decline in the winter and early spring into the summer months is almost 75 percent.  Another wheat play is try to become a bottom picker during mid July and August when the odds favor a rally in wheat prices into the fall and end of the year.  If you are looking for a short-term play in wheat, look to sell July wheat in early April.  The probabilities that you will get price erosion into the end of June are quite high.

Japanese Yen

The trading rule is: Buy December Japanese Yen futures in October and sell just prior to expiration in December.

Yen futures show an almost two-thirds tendency to rally in October into the late fall.  This single pattern is among the strongest of any of the currencies and the one most favoring the purchase of Yen futures in the fall for the seasonal position trader.

Treasury Bonds

The trading rule is: Buy December T-Bonds in the fall.

After Labor Day, when the December bond contract becomes the front month, there is more than a 70 percent chance that prices will rise substantially prior to the Christmas holidays.  The only exception to this rule is when rising interest rates create a fundamental reason for bonds to decline in price.  But the odds favor the long play in December bonds late in the year when Bond prices traditionally rally.

Crude Oil

The trading rule is: Buy crude oil in the summer.  Sell when it gets cold.

The time to buy crude oil is when no one wants the product – in the summer!  The probabilities that prices will improve in the early and late fall are better than 80 percent on a seasonal basis.  Moreover, life of contract lows are often made as early as mid-June as this market loses favor in the investment community.  For the long-term position trader, this is a seasonal with solid statistics favoring higher prices come Thanksgiving.

Soybeans

The trading rule is: Sell soybeans in the late spring in anticipation of the summer lows in mid-July and August.

Soybeans are a market with a decided seasonal bias toward lower prices during the summer months.  Just be aware that drought and other climatic conditions make beans among the most volatile of all commodities.  On a seasonal basis, soybeans are often a strong sell in April and May.  The contract lows may occur as late as the end of September or early October, but short sellers often have good profits by mid-August.

British Pound

The trading rule is: Sell September British pound futures in the summer.

Pound futures tend to be weak in the summertime with an almost two-thirds percentage favoring lower prices at Labor Day compared to Independence Day just two months earlier.  For traders who wish to “roll” into the December contract, you can often hold this position into the Christmas holiday season.  After the first year, however, you need to switch sides and become a buyer, since the British pound tends to rally early in the year on a seasonal basis.