It's a cleaner burning alternative to crude oil but the dirty truth about natural gas is the manner in which it has torched long-term investors. Measured in terms of $ per Btu, the commodity has fallen 80% from 2005 all-time highs, is virtually unchanged over the last 20-year period, and is still down over 10% in 2012, despite a 40% rally in the last 2 months.
The results have been little better for those invested in the United States Natural Gas Fund ETF (UNG). Flawed but still regarded as the standard proxy for individual investors seeking natural gas exposure, UNG has lost a jaw-dropping 60% in the last 12 months.
It's far too little too late for perma-bulls but Jeffrey Kennedy thinks finally, at long last, natural gas prices have bottomed. The Chief Commodity Analyst for Elliott Wave International watches the charts rather than the news. What the graphs are telling him now is that there's still time to get long the UNG, despite a 15% five-day gain. Kennedy sees UNG moving to the $21 - $23 range between now and August, as much as a 25% gain from current levels.
A glance at the 20-year chart of natural gas is enough to give bulls pause. The moves on the UNG and natural gas over the last 2 months have been huge but not unprecedented. This breakout may be the one that sticks, but the burden of proof is on the bulls, not the skeptics.