Natural Gas Seasonal

## Natural Gas Seasonal — Full Methodology

### Seasonal Pattern Analysis

1. **Heating season (Nov–Mar):** Natural gas demand peaks. Historically bullish for prices

2. **Injection season (Apr–Oct):** Storage builds. Historically bearish or neutral

3. **Seasonal score:** Rate the current month's historical average return over the last 15 years (positive = bullish seasonal, negative = bearish)

### Weather Correlation Overlay

1. **Temperature deviation:** Compare NOAA 14-day forecast to 30-year average temperatures for the major U.S. demand regions

2. **Bullish catalyst:** Temperatures ≥ 5°F below normal during heating season (more heating demand)

3. **Bearish catalyst:** Temperatures ≥ 5°F above normal during heating season (less heating demand)

4. Inverse logic applies during cooling season (summer)

### Entry Criteria

1. Seasonal score is bullish (current month historically positive)

2. Weather correlation confirms the seasonal direction

3. NG price is above the 20-day SMA (for long) or below it (for short)

4. EIA natural gas storage report surprises in the expected direction

5. Enter on the storage report day (Thursday 10:30 AM ET)

### Exit Rules

- **Seasonal exit:** Close at the end of the seasonal window (end of heating/cooling season)

- **Stop loss:** 8% from entry (natural gas is extremely volatile)

- **Weather reversal:** Exit if NOAA forecast reverses the temperature anomaly

- **Trailing stop:** 10% from highest close

### Position Sizing

- Risk 0.5% of portfolio per trade — natural gas is one of the most volatile commodities

- Use UNG ETF for simplicity or NG futures for better execution

- Max allocation: 5% of portfolio

### Best Market Conditions

Works best during extreme weather events (polar vortex, heat waves) that create outsized demand. The 2021 Texas freeze and 2022 European energy crisis were ideal. Underperforms in mild weather years with ample storage.

### Backtest Notes

Tested on NG/UNG daily data + NOAA weather data from Jan 2015 to Dec 2024. Weather forecasts are inherently uncertain beyond 7–10 days. The strategy uses a 14-day forecast but assigns higher weight to the 7-day window.