In the $4.60's after a cold front and fund rebalancing, but supply is still completely overwhelming. We won't dip significantly under 1 Tcf in storage at the end of withdrawal season if at all and yet the price is going up. Thoughts?
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Corps like Exxon are buying up land all over the southeast for NG exploration. Their notorious for bidding up the price of their own stock. Personnally I feel they would bid up NG as well, why not? The commitment of traders show commercials at record long buying positions and their anti trend followers in the futures market. Once NG goes over last summer highs you should see HF come in to buy the market due to trend following. Right now large Specs don't even exist in the market as seen in COT report last week. I'm actually looking for NG to be in the $7-$8 range.
I'm bullish on Natty actually
I read through the COT briefly but from what I gathered the relatively large long positions were a result of short positions closing out in anticipation of fund rebalancing and a response to the cold. This would be confirmed if the next COT showed a return to normal levels. Also, as many HFs were short natural gas this year because of fundamental oversupply, wouldn't it be likely for them to short in response to the majors buying up and developing significant new sources? I just don't see the major demand increase even with a recovering economy and unless the rig count declines significantly I just don't see the price getting that far from break even production pricing. Also, if the NWS forecasts any increase in temperatures prices could potentially drop. I haven't built out my storage report model entirely yet, but from projections so far it doesn't look as if its going to be any major news this week, and most likely not to cause a major price move upwards (that being said I'm flat before 930 am ct on thursday with my limited capital, no room for big mistakes like that)
Appreciate the responses, just a young monkey trying to learn and trade a bit. I'm also interested in other general thoughts within the energy complex. Just want to learn as much as possible and generate some decent trade ideas.
I agree with you Southerfried in the short term picture. Not long term
Try to observe the market action not evaluate it because the market is a process not a place where things happen. Remember that futures is a zero-sum game. There is no way that NG could rise unless someone was there to short and take your bet, it just utterly can't happen. The question is who is willing to absorb that risk? You answered that question. HF's and small specs. If there willing to provide liquidity to NG long's it becomes a question of when will they liqudate. You can only hold a losing position for so long which will further push prices up because to liqudate a short you must buy. I have a 100 reasons why i feel we will eventually see $7 nat gas but here is my example of observation
NG market picture..... There will always be a fundamental prob w/ NG because the US can not a) ship NG to Eurasia. NG is too expensive to transport and b)theres no NG pipeline under the atlantic from US to Europe so were left w/ oversupply.
Observance of price action..... leading into Hurrican season 2010, HF's and small specs began shorting the mrkt because no threat of another Katrina. who bought? Commercials(COT report). As prices rose late shorts are forced into liquidation adding liquidity to the buy side order flow. Commercial fills allowed the losers and out by selling on rallys locking in a profit and bought on dips pushing NG past resistance levels again. HF's being notorios trend follower continued to sell(COT report was proof) into rising prices due to the fundamental issue of oversupply. Now here we are....your theory was correct shorts(funds) were liquidating in order to balance books while commercials are buying on the pullback and selling to late longs who will get crushed @ the top and add liquidity to the downside move in the top of the year.
I hold tech analysis with a grain of salt. Two people looking at the same indicator yet they share a different view of where the market is going? who is actually using the indicator wrong? 85% of traders lose while 15% make money. what is that 15% doing? Pushing the market with price action. I THINK trading is 90% psychological battle because prodominantly all traders allow their account balance to decide when they should buy or sell instead of observing the other players sitting at the table. It is all just one big poker game to me.
Happy Trading!
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