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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.



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.

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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