Lately, everyone is talking about how oil is tanking. As it has dropped from $100 a barrel, through $90 and even through $80, you now have commentators making ludicrous statements that oil is going to $10 per barrel.
While those projections are absurd and oil's fall is likely limited at this point, there is another place in the energy market that I believe is ripe for a rise.
It's natural gas.
You see, there is a strong seasonal trend that kicks in right about now. In fact, natural gas tends to bottom around September and rise overall through January.
Why? Because of the weather. When the weather turns from being warmer to colder, people turn on their heating systems, which increases the demand for natural gas. Then, as much of the worst of winter has blown over in January, natural gas' price tends to peak out and begin to weaken.
In fact, when I went back and looked at a chart of natural gas for the past 10 years, I saw that natural gas prices rose during the September to January period seven times out of the last 10 years. (Two of the years where it didn't follow its seasonal trend were in 2008 and 2009 when the global economy was on the verge of collapsing.)
So, barring something as extreme as a global collapse, I believe it would be even more accurate than 70 percent. But honestly, a 70 percent hit ratio is more than enough to be successful in a natural gas trade during these months.
In fact, I believe in it so much, that in my trading service called Absolute Profits, we just bought a natural gas stock for this very reason.
You see, as the price of natural gas rises, so do the profit margins of these natural gas companies. Why? These companies pull natural gas out of the ground for somewhat of a fixed cost. However, what determines their profit margins is what natural gas sells for out in the market.
So as the price of natural gas rises, the probability of these companies making more money and having better earnings is much better, which justifies a higher stock price.
On top of this, natural gas stocks are a great place to be now because investor sentiment is horrible. You see, back in early 2012, natural gas bottomed in the $1's. The news media was saying that natural gas would never come back because we were awash in natural gas. Boy, were they wrong!
During the course of the next two years, natural gas went from the $1s (when nobody was interested in it), to the $6s (when "everyone" was interested in it).
Well, now that natural gas is around 35 percent off of its highs, once again, no one is interested in it.
So when you combine the horrible sentiment (which produces deep value) with the seasonal tendencies brought about by winter coming on, it's a great combination.
Therefore, now is the time to invest in natural gas stocks like we've just done in Absolute Profits.
And if you don't know which natural gas stocks to get into or if you want to look over someone's shoulder while they do it, then come check out what I'm doing in Absolute Profits
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now
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