​Why SPDR Energy Select Sector is Top Pick for Oil Seasonality

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Oil companies typically come into favor in mid-December and remain so until late April or early May in the following year, notes seasonal trading expert Jeffrey Hirsch, editor of Stock Trader's Almanac.

You can see this seasonal pattern in the yellow box in the chart below. This trade has averaged 11.8%, 8.0%, and 9.5% gains over the last 15-year, 10-year, and 5-year periods.

This seasonality is not based upon the commodity itself; rather it is based upon NYSE ARCA Oil & Gas Index. This price-weighted index is composed of major companies that explore for and produce oil and gas.

Crude oil and XOI have been rallying since September on OPEC/Russian supply cuts and improving global growth prospects.

Normally during this time, the opposite is true as demand is generally waning as the summer driving season has ended and the run-up to the winter heating season (a buildup in inventories ahead of anticipated demand) is largely complete.

Strength during a typically weak timeframe generally carries over and amplifies gains during seasonally favorable periods.

SPDR Energy (XLE) is the top pick to trade this seasonality. A new position in XLE could be established on pullbacks with a buy limit of $67.75. Employ a stop loss of $64.50. Take profits at the auto sell of $83.32.

Exxon Mobil (XOM) is the top holding in XLE at 23.25%. The remaining top five holdings of XLE are Chevron (CVX), Schlumberger (SLB), ConocoPhillips (COP) and EOG Resources (EOG).

Jeffrey Hirsch is editor in chief of the Stock Trader’s Almanac.

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About MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CVX Chevron Corporation 115.18 -2.55 -2.17 7,654,485 Trade
COP ConocoPhillips 50.42 -1.84 -3.52 7,133,721 Trade
EOG EOG Resources Inc. 71.75 -3.76 -4.98 5,160,018 Trade
SLB Schlumberger N.V. 32.03 -1.68 -4.98 13,964,058 Trade
XLE Energy Select Sector SPDR Fund 55.96 -1.94 -3.35 24,409,141
XOM Exxon Mobil Corporation 67.49 -2.08 -2.99 15,373,737 Trade

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