There is a counter investment trend known as the “Odd Lot Theory”. It isn’t a bunch of social outcasts making their picks on social media. This is what it is; individual investors don’t always trade in what is called round lots of 100 shares. They might buy or sell 73 or 46 or 84 shares. That’s known and an odd lot.
The “Odd Lot Theory” says individuals buy at the top and sell at the bottom. So, when there is a disproportionate amount of odd lot buying, the stock market is close to a peak and when odd lot selling is plentiful, stocks are about to rock.
A few of today’s headlines paint a similar picture.
Consumer confidence rises to highest since April as gas prices fall
At the same time…
Oil Rises to Two-Week High as US Crude Stockpiles Decline
Oil could surge nearly 50% when China completely reopens after ending zero-COVID policy, energy expert Dan Yergin says
As you can see on the chart below, consumer confidence rising coincides with United States Gasoline Fund, LP (UGA) hitting its lowest price in six months. UGA is an exchange-traded security that is designed to track in percentage terms the movements of gasoline prices.
The confidence version of the “Odd Lot Theory” could be in play. UGA rallied since touching bottom and showing potential signs of bullish life. UGA set a higher low followed by a higher cycle high after breaking a downtrend line. Simultaneously, a technical buy signal called a Bullish MACD Crossover was triggered.
The last time UGA followed the same pattern, the fund rallied from $56 to $66 or 17.8 percent in a little more than a month. A similar move would put UGA at $66ish again.
As you’ve heard a billion times already, past performance is no guarantee of future results. But, sometimes it rhymes. Investors worried about possible pain at the pump and the wisdom of the “Odd Lot Theory” might consider United States Gasoline Fund, LP (UGA) as a hedge against both.
Short term trading is only for discretionary dollars and investors who can absorb losses in short timeframes.
Rich Meyers
Investing Trends
