Explore Your Options by Tom Gentile
I know seasonality is an important factor
in the commodities markets. Is there
any way to play seasonality in the stock
market? Can you give an example?
Important seasonal patterns exist, not
just in the commodities market, but in
the stock market as well. One seasonal
trend that you might have seen in the
commodities market is natural gas.
Prices move higher before the winter
because colder weather creates an increase
in demand for the commodity.
As temperatures drop, consumers need
more heat and also more natural gas.
In the stock market, there are seasonal
patterns related to the weather
and other events. For example, stock of
natural gas companies like Williams
Cos. (WMB) reacts to changes in natural
gas prices. So there is sometimes a
seasonal pattern in WMB and other commodity-
related stocks, which is tied to
the price moves of the commodity.