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Warm Winter Won’t Derail These Top Seasonal Commodity Trades


The weaker U.S. dollar has most commodities on the rise today, with exception to Natural Gas, which continues getting pummeled by weaker demand given the mild winter weather and high inventories.

Despite the unusually warm winter, Jeff Hirsch of the Stock Trader's Almanac believes seasonal commodities trades are still intact. For starters, crude oil is already north of $102 a barrel. According to Hirsch, if prices stay this high, it'll exacerbate the seasonal trade and take the overall energy complex higher, as is expected this time of the year.

"Oil stocks start their move seasonally in December, runs through July, plays off the heating season, and gets into the build up for driving season," he says.

Specifically, Hirsch likes the Energy Sector SPDR (XLE), which includes oil majors like Exxon Mobil (XOM) and ConocoPhillips (COP). Weather aside, Hirsch points to the instability in Iran and his more bullish stance on the global economy as drivers of energy prices.

"What happens if the global economy picks up, demand picks up a little bit, and something boils over in one of these places (Middle East)?" he asks. "We'd get a little more upside in oil, and those stocks should benefit from that."

So far, it's been a rough season for natural gas, which typically moves from February to June on the home heating demand. But as mentioned above, weather and inventories are crushing this commodity, which today is trading near $2.72/BTU, a 10-year low.

"It's (nat gas) been down so long, anything positive could pop it," says Hirsch.

He likes the First Trust Natural Gas Index (FCG), expecting that crude oil could rise so much that it'll have a spillover effect and have more money flowing into nat gas.

Whether or not you want nat gas in your portfolio, Hirsch has some good advice for any homeowner: "Your utilities at home, lock in some rates right now," he says. "A little home economics."

As a final first-half of the year seasonal commodity trend, Hirsch points to Dr. Copper. "In anticipation of the construction build up in late winter/early spring and also the new car model year in the summer, copper tends to make a seasonal bottom in December and peak in May," he says.

Here, Hirsch points to the Global X Copper Miners (COPX) basket and Southern Copper (SCCO). Of course, demand out of China is a primary driver of copper prices, but the feared China slowdown isn't deterring Hirsch's outlook.

"We don't think that it's going to be such a hard landing," he says. "We think there's going to be a softer landing in China economically than is priced in right now; and copper will benefit from that."