That’s when natural gas prices will rise by 35% in 28 days.
How do I know? It happened last year when traders ran out of, errr, gas.
Natural gas traders got extremely bearish in mid-November 2016. That’s when the Commodity Futures Trading Commission (CFTC) revealed net short commitments among large speculators had maxed out.
Soon afterward, the price of natural gas went on a tear.
The bearishness is at another extreme today. The pricing action is similar as well …
Are there any sellers left to keep pressure on prices now?
Even if natural gas can’t rack up a 34% gain from here, it does look poised for a sizable move higher.
Based on the key Fibonacci levels and wave patterns I monitor, I wouldn’t be surprised to see natural gas prices rally between 9% and 17% in the coming month.
And what I see in the near term is just one small fraction of what the Supercycle in the energy sector is pointing to, longer term.
If you want to boost the profit potential of this trade, consider using leveraged ETFs that move two- and three-times faster than the price of natural gas. Two that are worth a look are the ProShares Ultra Bloomberg Natural Gas (BOIL) and VelocityShares 3x Long Natural Gas ETN (UGAZ).
Leading into last year’s peak consumption season, natural gas storage stockpiles had been growing more slowly than expected. Stockpiles were considered tight. This probably helped drive the 34% rally last November.
This year? Much the same.
Stockpiles of natural gas are below their five-year average … and lower than last year’s levels.
Natural gas production, however, is expected to remain steady. But demand is expected to rise on the back of switching from coal as well as increased use of liquefied natural gas (LNG) and America’s exports of it.
Just look at how natural gas is set to become an even bigger source of electricity generation …
And here’s a glimpse of increasing U.S. LNG exports. (In addition to rising exports the traditional way, via pipelines.)
I certainly see a short-term trading opportunity in natural gas. And a good way to act would be with the leveraged natural gas ETFs mentioned above.
Another way, if you believe this trade has legs, is to buy shares of a natural gas producer or midstream partner that profits from the increased flow of natural gas in North America and around the globe. Consider W&T Offshore Inc. (WTI), EQT Corp. (EQT) or DCP Midstream LP (DCP).
W&T Offshore has a history of earnings beats. The chart of EQT bodes well for a breakout move higher. And DCP kicks off a fat cash distribution (>8%) to its unitholders.
Important: You HAVE already signed up for our three-day investment symposium, right? Not yet? Not sure?
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Do right,
JR Crooks
Tony December 16, 2017
Well, this was a total BUST! When sideways for a month or so, and absolutely crushed since December 1st. The news is it got crushed on increased output, lower demand and warmer winter expectations.
So now what? Is it going to continue to get crushed or rebound?
James October 15, 2017
Are we in a kondratieff cycle of 45 to 60 years in which long term investment in infrastructure is gonna surge? Could we be in a jugular cycle of 7 to 11 years which consists of fixed short term investments? We are certainly not in a Kuznets cycle 14 to 20 years or in a kitchin 40 month cycle. We live in interesting times. We know the credit crunch is over but is the boom back. We are in a prosperity, recession, depression, improvements economic cycle, in other words we are in a boom, recession, depression, recovery and growth cycle. Let the boom begin and be a big boom at that.
Ronald E. Baker October 13, 2017
Peyto (PEY-TSX) is an interesting Canadian natural gas and nat. gas liquids play. Over the last 9 years it has seen a decline in earnings and Weiss ratings has dropped it from A- to C- since the depths of the 2008 – 2009 crisis and 2015 – 2016 oil market price collapse drove its earnings down. Since January 2017 it has started to recover, earnings up sharply. PEY pays CAD $0.11/month, yielding 7%. It has paid dividends on a rising trend since 2011. PEY seems poised for recovery if natural gas and oil prices continue to recover as proposed in this Edelson Institute article. I would appreciate some commentary on PEY prospects.