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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
Gas Consolidating for a Big Move 7/28/2020Natural Gas at the 4 hour view.
Gas is currently consolidating right now into a wedge. The end of this wedge is early next week. If I were to guess, gas is trying to push up.
Gas currently has an inverse head and shoulders pattern going on. A very slow one, but it's telling me that gas may be getting ready for a spike up. We are in the middle of summer after all. Gas demand has heightened for air conditioning.
Natural Gas - Bought the DipNatural Gas prices got hammered this past week. There's too much supply and not enough demand however, prices are near the bottom of the trading range and Summer heat should give prices a boost soon.
It's also worth mentioning that the Dollar DXY is trending lower and which is bullish for all commodities.
Prices are breaking out of a downtrend so I've opened a long position on the September(U) contract.
It's nearing the end of the month and the August(Q) contract will expire soon.
+1 @ $1.725 ($QGU20)
Is this year any different?5 years running July has seen a downtrend. Is this year any different or is it even worse than average?
Natural Gas Daily Cycle UpdateJune 26 is well confirmed as the daily cycle low.
The bulls were strong early in the cycle but now appears to have been a strong counter trend rallied fueled by weather changing short term fundamentals.
Bulls do still have a chance but with the weak bounce that failed this past week price action favors the bears.
Depending on the bear strength price targets would be $1.50 or $1.30, there is a chance for substantially lower due to current market conditions
If fundamentals don't change much from now $1.50 will offer substantial support.
Natural Gas: Channel Down on 1D.NG is trading on a Channel Down on the 1D chart (RSI = 48.535, MACD = 0.007, ADX = 20.341) since the May 5th Top. The MACD is currently making a sell cross, so if the Former Higher Low trend-line breaks (dashed line), we will sell up to the 0.786 Fibonacci retracement.
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Natural Gas - Buy the HeatHot weather will likely boost Natural Gas prices in the near term so I opened a long position after price broke above $1.80 again.
$QG - E-mini Natural Gas Futures
+1 @ $1.815
Sell Limit -1 @ $1.94
Additionally, the MACD is showing bullish momentum on the 4hr chart and prices are being supported by the 50 and 200 EMA. If price clears $1.83 I see the momentum taking it up to $1.94 at the very least and $2.04 at the most. Should prices fall I might buy more and average down my cost basis since I don't think prices will stay down for very long under these conditions.
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