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Gas prices in Montreal rose to an all-time high at 1.53 on Sept. 12, 2012. (Christinne Muschi/The Globe and Mail)
Gas prices in Montreal rose to an all-time high at 1.53 on Sept. 12, 2012. (Christinne Muschi/The Globe and Mail)

Schizas’ Mailbag

Bide your time with this gasoline-tracking ETF Add to ...

Hi Lou,

I am interested in United States Gasoline Fund. I do not see a seasonal pattern with this stock. I am interested in your thoughts on trying a trade at this time.

Thanks,

Tom

Hey Tom,

Thanks for the assignment.

United States Gasoline Fund LP is an exchange-traded fund that tracks on a percentage basis the price movements of gasoline. In terms of a seasonal trade on gasoline you should read Don Vialoux‘s take on the subject, in which he cites a period of seasonal strength for gasoline that runs from late January to late April and that can extend into June.

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An examination of the charts will inform my thoughts on how to best manage UGA.

The three-year chart depicts the 52-week high of $65.86 which was reached on Feb. 14, 2013. The MACD and the RSI both generated a sell signal at that point driving the units to multiple retests of support near $55.00. In addition there is an existing downtrend that has to be resolved before a new advance can proceed. Finally, look for resistance along the 50- and 200-day moving averages as the units attempt to move higher.

The six-month chart provides a close-up of the buy signal generated by the MACD and the RSI near $54.00 in late June quickly followed by a sell signal near $63.00 in late July. Not a bad trade in just over three weeks. The momentum indicators also signalled a sell in late August also near $63.00. At the moment the MACD and the RSI are neutral at best.

In examining the charts on your behalf I think the best course of action is to keep your powder dry and see if UGA can break above resistance along the 50- and 200-day moving averages. More likely in the near term would be another retest of support near $54.00.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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