I shared with some of my buddies here my crude oil thoughts many months ago, and had you gotten in when I started rambling on, you would have made at least 50%.
A couple of days ago, I was trying to call the Natural Gas breakout, and was writing a message on this board at the exact moment that it was happening.
The last few days have served to confirm to me there will be money made in Nat Gas. I don't know much about the fundamentals. I can guess that its like buying retail store wallmart a few months before christmas/thanks giving, because anticipation will build about expected sales in good times. Similarly, I presume Nat Gas is doing what its doing because hurricane season is around the corner and Nat Gas flows are disturbed more than crude oil in the gulf when hurricanes hit.
Found a link (old) but since natural gas is down around $4 and crude is around $70, you'll understand that a move in the smaller Nat Gas commodity no matter what it is represents a bigger percentage gain than a move in $70 crude. But hey, I'm a fly-by-night fundamental guy. The true Technician in me sees good sentiment and has seen a fairly clear breakout.
Nat Gas on the July contract is now 4.29, a clear close over $4.31-4.33, provides more compelling reason to get in, but a close over 4.46-4.50 provides extremely compelling evidence. Note: these commodities traders will whip you in and out if you are trading intraday 3 min to 25 min charts, don't be surprised if you gain 5% today only to have it back down tomorrow by 3.5% in preparation for the next 5% move the following day. I'm suggesting it as a swing trade, my specialty, so watching the day and weekly charts.
I certainly don’t mean to imply that I am some type of natgas fundamentals expert, but from all I have read the fundies suck. Of course, I tend to agree with you that it is all lies and spin, so I really don’t know what any of it means. What I read is that the big issue is storage, that supply is relatively inelastic and that demand has dropped significantly, and may drop more. Summer is a time when production exceeds demand so it is all about how fast the limited storage space is being filled up. Apparently, it is filling up too fast and is higher than ever before at this time of year. The big “fear” is that storage gets maxed and the price collapses before the hurricanes or winter heating season starts. You probably know all this, but I thought I would mention it just in case. In my own distorted conspiracy type thinking, I figure when the situation looks just about as bad as possible, then the bottom is in and the price starts to rise. I think that is the case now in natty, because it just looks hopeless to me. Good to hear you like the technical’s though, so do I. As usual, I bought to soon but have cost averaged in, so I am in fairly good shape on this one. Thanks for sharing your thoughts.
I only learned much of what you wrote yesterday. I know you'll laugh at me but I wasn't joking when I said I buy on the technicals and perhaps later I'll look up the macrofundamentals.
To add to your information, I also found that the speculation seems to center around the carbon tax story.
First, remember the uranium story 4 years ago. Stories flooded the market with how nuclear power plants were going to be built basically every week, nevermind the fact it takes about a decade to build one. What happened? The fuel, uranium, even at reasonable inventories back then started a moonshot in the frenzied speculation. Uranium and the companies that mine them exploded.
Jump to today. The carbon tax represents $700 billion in potential revenue for the government and businesses will supposedly have no choice but to take the tax incentive to reduce their carbon blue print. Most of the electicity generating utilities in the USA are Coal fired. Coal produces 50% to 70% more carbon emissions than Nat Gas burning.
Yesterday a report came out that said the USA reserves of Nat GAs increased 35% based on what was previously known. The increase was due to improvements in Shale stone extraction technologies. Now, when the news broke, it didn't cause Nat Gas prices to fall, in fact, they rose. What would make it rise, when the world has just learned there is even more supply around?? I think its speculation that indicates this was, but even more so now after yesteday's report, a true alternative to goal fired plants.
Interestingly when tne inventories of 116 bcf were released, this caused a fall in prices. Why? As you pointed out inventories have been building at significant rates over the last year, so why fall on this build? Also interestingly, it didn't fall enough to negate the buy signal that was generated a few days ago, its still in the bull channel.
To wrap it up, I think the same thing that happened with uranium is being speculated upon with Nat Gas. It is the future and the USA has abundant amounts of it as fuel to generate its electricity needs for decades to come at 50% to 70% less emissions.
I'm still in and will likely average in more if it doesn't break down, but there's definately something going on and the trick is to get in with the big speculators before the ride starts.
You are so right! I was going to buy UNG when it was at $14, thought it would go lower and now it is at $15.88. Look at how the volume has spiked since June. I hate chasing but this looks like the time to do it.