Seasonality and seasonal patterns
31 December 2021
Analysis and considerations on Eur-Usd
14 January 2022
I work very little with metals with the exception of copper. However, there is one spread on palladium that has given me good satisfaction in recent years. It is the PAH22-PAM22 spread, which has a bearish seasonality at the beginning of each year (January-February).
My analysis will be purely statistical. I start by showing the chart with the two seasonal patterns at 5- and 15-year.
Highlighted you will find the seasonal window which as I said is bearish and starts in January and ends in February. The price level compared to recent years is average as shown in the Seasonality Stacked.
However, if you look at the Continuous histogram below, you can see that the price level is within the 25th-75th percentile range. I will make all the considerations at the end.
That January is a bearish month for the spread is also shown in the Seasonality by month chart. In the last 5 years the spread has always fallen in January (which is why I started by saying that the spread has been good for me in recent years). In the last 15 years it has gone down in 10 years (and 5 years it has gone up).
Considering that even in the last two pandemic years the spread has fallen, it leads me to think that in the last five years there has been a strengthening of bearish seasonality. The chart does not show the extent of the monthly rise or fall.
The other charts do not provide any interesting information, so I come to the conclusion. The spread is certainly interesting and with risk is not high, one point of price movement corresponds to $100. However, this is not the correct level to enter, better to wait for a probable price rise in the coming days, at least up to $1.40-2.00 area before selling the spread.
The only downside is the low liquidity and therefore the margin requirement is high at around $4,800. This is a spread more suited to experienced traders.
I work very little with metals with the exception of copper. However, there is one spread on palladium that has given me good satisfaction in recent years. It is the PAH22-PAM22 spread, which has a bearish
I am a macroeconomic and financial analyst with over 30 years’ experience, including two years as a fund manager. I specialise in currencies and commodities, and I am the author of several successful books on trading, macroeconomics, and financial markets.
2 Comments
Hi, I think there is a typo because one point of price movement corresponds to $100.
Thanks for the post
Typing error, just corrected. Thank you!