Natural Gas
Natural gaz shortAs I said Market will change direction
The market has responded to what we said yesterday.., So the first target Hit 2.30
So now the second target is 2.175
just wait .. protect your position
Mathematically it must go there
good luck
ALL COMMODITIES RALLY|INFLATION OR RECOVERY?
As it is obvious from the charts and the title above , the prices of the unrelated commodities, that were presented in the selection above went up significantly from the lows of 2020.
It is possible that, with the exception of lumber, that is beating the all time highs for some reason, most of the current price increases are just the recovery to the pre-covid levels. One might argue that this simply reflects the fact that they were all oversold and that this behavior is just front-running the recovery.Keeping that in mind, let's explore if this could be a beginning of the inflation spiral.
The exploration:
There is essentially three types of the economic shocks:
1-Demand shock.Deflationary pressure. It happens when the economy is quite capable of producing the same amount of goods as before the shock, but the money supply has shrunk, and the consumers have less money to purchase the said goods. Less money is chasing same number of goods, and while the supply inevitably responds to the changed conditions and starts shrinking too, this takes time, and meanwhile you have deflation. This was the kind of shock/crisis we had the last two times. That is why the FED's QE did not create inflation, or rather is was locked up in the financial instruments, as it was filling up the hole in the money supply, created by the bust of the markets, a chain of defaults and deleveraging of the system.
2-Supply shock. Inflationary pressure. It happens when the consumers still have the money to buy the goods, the money supply is still there, but the production is not, so the classic inflationary scenario kicks in, where more money chases less goods. Prices rise.
3- Simultaneous demand and supply shock. That is a mixture of the two of the above. In that case, the two somewhat cancel each other out, as the money supply drops together with the production of goods. However, in reality, one happens faster than the other, which determines the kind of pressure it will have on prices.
Now, it was and is a massive challenge for us to figure out if the covid-19 lockdowns were a demand or a supply shock, or rather, which shock would be stronger, as It is obvious for everyone, that businesses closing up limited both the supply and demand for goods, so this is clearly the simultaneous supply and demand shock. And while the balance was not perfect, the two shocks were supposed to cancel each other out, yet the FED and the Federal Government stepped in and the first one provided the "unlimited liquidity", propping up junk bonds, stocks and other heavily levered assets, while the latter rolled out an unprecedented cash handouts to tens of millions of people to fill in the gaps of lost incomes.
These two actions clearly tipped the scales to the inflationary pressure side(supply shock) as millions of people were buying goods with the money they did not work for(i.e. did not contribute anything to the supply side).
Now, coming back to the commodities prices. As I said, one might argue that this is front-running the recovery, however, that can be countered by the fact that the recovery from any significant crisis takes at least 1,5 years and it took 3-4 years the last time to get back to where we were before, so getting prices of anything to the 2020 beginning levels, where the economy was growing fast and grew for 12 consecutive years before that is wildly optimistic at best.
The economy has not recovered, and the recovery will take 1-1,5 years minimum. Thus, I am making the case for that these upshots in prices are the early warning signs of the real inflation and that the further increase in money supply will accelerate this process. Besides, it is clear from the charts that many commodities stand or are reaching strong levels, while having massive bullish momentums, so should the levels be broken upwards, there is literally no ceiling for how high the prices might go.
And mind you- it is not a price increase of one or two commodities. The selection above is a representation of the cross-sector simultaneous price increases for the raw materials. I hand picked those with 50% or more increases, but the surges up are visible everywhere across the commodities, so even a 5-7% broad annualized inflation is something unseen by the western world in decades. So yes, this IS inflation. My congratulations to the FED: after 13 years of struggles, they finally got what they wanted- the real inflation, yet I am not sure that the people are as happy for that as the FED bosses are.
Guys, thank you for reading, I appreciate your take on the issue, so feel free to comment below. Also, don't forget to like and subscribe!
Have a nice day!
NG at a Crossroads 8/18/2020NG at the daily view.
NG finally played out its measured move from the inverse head and shoulders pattern during the summer and the bull flag from a few trading days ago.
The original measured move was 2.48. NG made it to 2.465. Close enough. It's too bad that that I exited my long positions out of risk management. It's Natty after all.
Right now, the NG is between two trend lines. Furthermore, NG is above major moving averages including the 200, 300, and 400 DMAs. Currently, the 50 MA is about to cross the 200 MA. All these signs are bullish.
What's the bear case? September is coming. Usually, there is a pullback in early September due to cooler weather.
Courses of action? If NG pulls back during September, that would be a good time to start scaling in longs for the fall/winter ramp up. If that pullback happens, then 1.98 may be the lowest projected price. However, 2.24 and 2.08 are also supports to consider. Personally, I'm doing a bigger buy order at 1.98
The key resistance right now is about 2.49. If the NG breaks above 2.49 or that upper blue line, then there's not much stopping it go head to 2.70ish.
Time is Running Out for NG Bears 8/14/2020Natural gas at the daily view.
Natty is currently in a giant bull flag right now. Bears had nearly 2 weeks and every chance to take NG down. However, it didn't happen, yet. Unless that happens, Natty is consolidating for another leg up.
The 300 DMA is at 2.08. The 400 DMA is at 2.24. That's why Natty has been bouncing between those two prices.
Here is why bears are running out of time. The 20 DMA just crossed upwards to the 200 DMA. Normally, that's a bullish sign. The 50 DMA will be doing the same within less than 2 weeks. When that happens, the measured move for the next leg up is around 2.48.
My bias at this point is becoming increasingly bullish. Personally, I'll start scaling in next week.
Natural Gas Seasonal Wait 8/12/2020This is natural gas at the daily view.
When it comes to natural gas, you have to think big picture first. Natural gas moves much slower and in bursts. During the summer, every trader and the mother was bearish on natural gas. What they didn't see was the inverse head and shoulders forming (marked with yellow curved lines). Natural gas' sentiment is still very, very bearish. The bearish traders are looking at NG's micro movements and for any signs of bearishness. That's more of a sign of desperation.
In market psychology, whenever something is excessively bearish or bullish, then the opposite usually happens. Why? Because the traders tend to take a bias in positions that they are ALREADY in and tend to double down in their bias.
Natural gas is currently in a bull flag right now. There is a minor support at $2.05 where the bottom of the flag will intersect around August 14th. The bigger support would be (price in time) around 1.975 by August 24th. That's when the bottom of the bull flag meets the channel line (bigger support). In the case of NG, time is more important than price.
NG is very seasonal. It's experiencing its summer spike, but then consolidates or drags down in September in preparation for the fall/winter ramp up. Here is the bottom line with NG. Bears have less than two weeks to take this down below 1.90 and cancel out the bull flag. The longer that it stays consolidated in that bull flag, the more buyers that NG will gather for the next leg up and just in time for the rest of the summer spike. Right now, it's at a vulnerable position until it reaches a support to bounce off from. If bears fail to take this down below $1.90, then the measured move for the next leg up may be around $2.48.
I'd rather wait to see how it reacts to the supports below myself before committing.
Natural Gas at a CrossroadsNatural gas at the daily view.
Natural gas experienced a pullback. That shouldn't be surprising at all since profit taking after a spike up is normal.
The lower blue line is the ascending resistance stemming from March 23rd. Interestingly, a long-term channel line is also acting as temporary resistance.
So, natural gas has two choices. Either natural gas consolidates here for another move up or move down to a key support below around $1.98. That channel line below served as a support from years past once momentum to the upside picks up.
For natural gas, you have to think in bigger time frames. Most gas traders that I see only see it at 15 minute or similar small frame views. By being stuck at smaller time frames, traders tend to lose the big picture. For example, many permabears didn't see that inverse head and shoulders pattern in the last 2 months nor the bottoming pattern at the weekly view. Furthermore, natural gas is currently forming a big bull flag... for now. If natural gas reaches 1.98, the bull flag is still intact. August usually provides the summer spike. However, September is when natural gas usage slows down.
Why don't I think natural gas will continue to decline? Seasonality is obvious. A wave of gas companies already filed for bankruptcy back in June which cuts down the number of suppliers in the longer term. The Midwestern states are also still open where a large part of the industrial sector resides. The industrial sector is one of the largest users of natural gas by the way. The Midwestern states are much more sparsely populated and the population travels less overseas too. Last year, natural gas declined due to the US having one of the warmest winters in recent history. If I remember my science classes from college, nature has a way to balance things out. Current forecasts for this coming winter in the US is another polar vortex.
That's fundamentals. Let's look at it from a technical view. Last month, natural gas was only around $0.50 from the historic lows. Gas also already had a 2-year bear market. As everyone who ever traded for years, every market cycle and every bull/bear market comes to an end eventually. The summer months show an obvious bottoming pattern. It might be extended. The flag support for gas is around 1.58. That said, the downside is much less than the upside. Let say, you longed from 1.90 and the prices dropped to 1.58. Gas is very seasonal. You would only play the waiting game for prices to ramp up in preparation for fall and winter. If you short from 1.90 and enters its seasonal bull run, what are the chances that it will return back to the 1.50? I don't know myself, but it seems lower than the previous scenario.
Think about it. If you go short near the all-time lows, that's as reckless as going long near the all-time highs. It's simple probabilities. Market sentiment about natural gas is excessively bearish. If everyone is bearish on an asset, then that's actually a bullish signal. Why? If all the bears are already in a short position, what will stop buyers from driving the price up?
The issue with gas is that you have to look at it from a macro view like Bitcoin. The big picture will always trump the small movements.
Gas in Season 8/8/2020Natural gas is finally in season due to the increased demand for A/C.
Natural gas made an inverse head and shoulders pattern for the past few months. It met resistance right at one of my green lines. It's green because it will eventually become support in the future.
Natural gas is very seasonal. Right now, the demand has increased due to the hot weather in August. However, natural gas may spike down during September due to cooler temperatures.
If natural gas doesn't go back to the lows, then it may be forming a multi-day bull flag during September. Natural gas tends to really ramp up in colder temperatures starting in mid-October.
Personally, I would not short natural gas. Sure, you can make a case for the spikes down. Let's look at the big picture here. Last month had the lowest prices in natural gas in nearly 30 years.
If you are already at near historic lows, how much more can you short? You're trying to squeeze juice from a dried fruit at that point. Let's say you longed gas and it spikes down. All you have to do is wait for winter to get profits. Why? Cold temperatures require heat. Heat requires energy. Energy requires fuel.
Oil prices are also coming back too. If you think about it, gas is a laggard. You need oil to produce gas. If oil becomes more expensive, gas will eventually become more expensive.
If not, imagine by next year if a vaccine is developed. Uni of Oxford was on it since January. Demand for energy will skyrocket once a vaccine is mass produced. We were already near historic lows in natural gas. It's just playing a waiting game for it to spike further.
Chess, not checkers.
Natural Gas: A secular lowNatural gas had made a secular low. It has also broken out of its wedge and is heading higher in the years to come.
Natural Gas: Sell opportunity within the Megaphone.NG hit today the Higher High trend-line of the Megaphone pattern that it has been trading in since the start of the year (1D RSI = 69.350, MACD = 0.105, ADX = 33.132). The 1D MACD has entered its 1 year Sell Zone. We are taking this as a strong Sell Opportunity at least towards the 0.618 Fibonacci retracement level, which at the moment is at 1.846. This idea is invalidated if today's High breaks, which will in turn break the Megaphone.
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Natural Gas is in Season 8/3/2020Natural Gas at the daily view.
Natural gas spiked up today which shouldn't be a surprise. It's about time if I may add. Natural gas had an inverse head and shoulders pattern in the last 3 months and it would skyrocket above $1.89. And that's what happened.
Natural gas was in a volatility box for 3 months. It was building up energy for a breakout. That breakout is seasonal. Where did this demand come from? Air conditioning and energy usage.
How so? Hot summers demand more air conditioning. A/C requires more energy usage. The increased energy usage causes more demand in gas. We are at the hottest part of the summer now. Gas is in season.
Despite popular myth, vehicle usage makes up less than 1% of natural gas usage. It's buildings, factories, and homes that have the most usage.
Usually, this is the summer spike at the monthly view. It tends to pullback during September then ramp up again in October to January. It's very obvious why gas would be used more in those months.
This is why I suggest traders to widen their horizons. Traders who pay attention to equity only just missed out on a potential 30-60% profit today with natural gas. There should be one more day of continuation. However, the high probability, high rewards bounce was back at $1.70 or below.
Personally I would not short natural gas unless you know the seasonality like the back of your hand. That takes months to get it to a science. In addition, we are at near historic lows. There is a lot more upside potential in natural gas at this level than the downside.
Why? I don't see natural gas getting replaced anytime soon. I don't see SBSP or fusion technology being developed anytime soon. The only alternative that I see for natural gas with the same or greater output is nuclear energy. Side note, nuclear power plants came a very long way in safety and containment over the last 30 years. I'm actually impressed and it broke down my own assumptions. That's from personal experience. Here is a Ted Talk video to fully express what I mean.
www.ted.com
Natural Gas - Winter ContractsWinter contracts for Natural Gas are already trading near the pivotal $3.00 level.
If Winter this year turns out to be average prices will likely sell off towards $2.50 (the 200 Day EMA).
However, if production continues to fall and Winter is cold enough, prices can break above $3.00 and complete the parabolic move that is forming.
If the latter happens, I see prices for December(Z) contracts topping out around $3.10 - $3.30
February(F) I see topping out around $3.40 - $3.60
I'm looking for a buying opportunity on the December contract and praying for a cold November to sell it in.
Gas in a Box 7/31/2020Natural gas at the 4 hour view.
It turns out that natural gas has been in a downward channel since 2018. Furthermore, in the last 3 months, gas has been in a trading box.
You know what this means? Gas has become predictable. It may look choppy at first, but it's trading in a general range between 1.58 to 1.93. There were spikes above and below that range. However, those spikes do not last long at all. Furthermore, it seems the upward and downward movements last in a weekly cycle.
Since equities seems to be going no where, I think I found my favorite commodity to trade. Personally, I would mainly long gas at the bottom. Why? We are at historic lows for natural gas. Gas is also seasonal. Usage has increased due to the need for more air conditioning in the summer heat. I would still use UGAZF since the liquidity is still there. I would not short gas unless seasonality, lower usage, and a cyclical correction are all on your side. Shorting takes a lot more skill than longing.
Once we start recovering economically, natural gas may skyrocket due to increased usage. How much usage would increase if California and New York actually open for business?
Natural Gas August TargetsBulls are still hanging on with a chance of changing the weekly trend. Price does look exhausted and a seasonal cycle low in August is very possible.
Green line is based on brief consolidation and continuation. Price target is $2.15
Orange candles is the June price action.
Red is a steady grind lower over the next 3-4 weeks.
Both the orange and red have price target of $1.50 down to $1.30 as discussed back in June. Would be possible that price doesn't get this low before September expires and with current spread may never.
Natgas on the Range by ThinkingAntsOkMain items we can see on the chart:
a) The price is on a weekly support zone and since MARCH 2020 has been ranging between 2USD and 1.50USD
b) If we analyze the range we can see that the price is moving towards the higher level of it, after the breakout of the zig-zag pattern (corrective structure)
c) The breakout of the range will give us reliable information about what to expect. Currently, we are in a historical reversion zone
d) If a breakout happens (bullish), we will wait for a daily corrective structure, and we will take the beginning of a new weekly motive wave IF all the filers happen.
e) FILTERS: Breakout of the range + 3 weeks correction
Natural Gas could be breaking out soonI have a love hate relationship with this stock as it is volatile as you can see from the chart.
You can be in the money today and the next two days, it could dampen your mood by heading south once more. Then , when you give up buying, it offers you an element of surprise.
Anyway, the 4H chart shows a possible breakout around 1.80 level or it could revisit the 1.60 level support once more before rebounding.
Trade with care .
Natural Gas - Winter 2020-21 UpdateOn June 3rd I posted my strategy for trading Natural Gas this coming Winter (linked below). As prices slowly drift lower, it looks like traders are beginning to accumulate long positions.
I've opened a long position on the December(Z) E-mini contract and might add 1 or 2 more over the next couple months with the sell target up around $3.30ish. Will see how it plays out.
I chose the December contract because the volume on the E-mini is extremely thin on the January and February contracts.
+1 @ $2.76
Natural Gas - Bought the Dip AgainTraders are done selling for now and will be looking to test the $2 level next in anticipation of August heating demand. A bullish pennant is forming and should break out after price clears above the 50 day EMA.
Moving forward, buying the dip is the play as we head towards Winter.
Opened a long position on the September(U) contract @ $1.795
