I agree.. I am waiting for UGAZ to get at around $30. Now, it is too risky and one could hold the bag easily as soon as there is a small change in the fundamentals (e.g., larger injection than expected tomorrow). Although, I could have made quite a bit of money every time that UGAZ has corrected in the last month. NG keeps coming back to around 4.40!!!
This is an exception... most days that UNG opens in the green finishes much greener. Maybe this is in the early indication of a trend change. Independently of being short or long one can make a lot of money just playing UGAZ or DGAZ according to how the day starts (today is an exception).
Oil, NG, Gold, Silver. .... all up big today. Thursday's NG report might be a turning point, everybody is expecting once again below average injection, so there is big room for surprise.
Yes, everybody is expecting a below avearge injection for this Thursday. However, I don't think that this time there will be a 5% rally like last week. My guess is that there will be anticipation to the low injection tomorrow. The short term fundamentals are still in the long side with storage below 5-year average, weather is favoring the short side. I read some interesting Bloomberg news over the weekend about the risk of power shortages this summer in California and Texas, and NG being the fuel of last resort.
EIA can be wrong. For example, they can not predict the effect of persistent weather conditions. If the last two months have been warm we would be now at NG $3.5 or less. Instead, we are at $4.4 and now the fundamentals are very bullish. It will take a cool summer to bring back NG to $3.5. What are the chances of having a cool summer? Maybe 25%?
Why? The shares are available any time even if the ask/bid spreads are large. The prices are still following the underlying indexes. Today I sold DWTI in a limit order without any trouble. The largest problem is the 3x decay and they are very dangerous for long term keeping (just like DGAZ or even UGAZ).
You can buy UWTI and UOIL that belong to the same family of ETNs as UGAZ, and you will not get the truly annoying K-1 schedules at the end of the tax year.
That is an interesting point of view, it will take months to see how the scenario develops..... It is likely that will fall in between those two extremes.
Persistent low injections, reserve below 5-year average, persistent low temperature in the US Eastern side, perception of lower NG production, perception of higher demand including new applications, above average nuclear power outages, Goldman manipulation, etc...
Hope that everything will change just because it can not be all trending in the same direction forever, gas-to-coal switching, higher prices reducing demand...
It is very lopsided in the bull side, but for how long? $4.4 seems reasonably high. Very few would have put money on this price just two months ago.
The injection data does not seem to justify a nearly 5% increase, and usually Thursday direction trends to continue on Friday trading. NG at $4.50 is possible by tomorrow. I think that the price is going to start affecting the demand.
UGAZ is up 100% in the last two months!!! Yes, it can give up a good part of that quickly because of how 3x products work. However, DGAZ will not go back to where it was because of the mathematical decay. it has been pushed down really low, and is starting to be in potential reverse split territory
Right now (Sunday night) the NG futures are up again. I expect the momentum trade to continue as long as the other commodities are pressed down, and there are no significant negative news on weather or weekly injections. This is not a good time to be short. It is easier to say that I am going to hedge with UGAZ than actually doing it. The psychological issue here is that one always think that NG can not go further up, and DGAZ is just about to start a rally. Who wants to hold the UGAZ bag? One goes through the infamous "frog in boiling water" effect, and it has been many weeks that shorts are awaiting for the NG to correct. However, the fundamentals of the game have changed and now there is a slight undersupply instead of oversupply.
It was known a couple of days earlier... so nothing new.
It looks to me that the NG trade is just identical like one year ago, but in the opposite direction. A little of supply imbalance and a little bit of weather and that snowballs to a 35% run since mid February. Now it is mostly momentum with some fundamental support. However, the more it goes up, the closer to the end of the run and that is a fact independently of being long or short.
There is some obvious rotation: Gold, Silver, and oil got hammered today, and probably some of the same people got in the NG momentum trade. There were no other significant news to justify the additional 2% besides that the weather might be a little bit colder next week (nothing new, so it should be priced in).
NG peaking here. Everybody getting too optimistic. It looks like just one month of cold weather has changed the perception and it has made a real dent in the inventories. It seems difficult that NG will go below $3.5, but the futures are in the low $4 range indicating that there is no much upside unless there are more unusual conditions. One never knows with the ever volatile NG.