Natural Gas The Next Double

This is a discussion on Natural Gas The Next Double within the General Trading Chat forums, part of the Reception category; Natural gas has made a bottom. This bottom is likely a much longer term bottom. Price may double and even ...

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Old Nov 21, 2011, 6:36pm   #1
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Natural Gas The Next Double

Natural gas has made a bottom. This bottom is likely a much longer term bottom. Price may double and even eventually triple. This move up coming in natural gas is partly fundamental and partly technical. It will be discussed below.

Natural gas is trading at a major discount to oil. Oil continues to hover around the $100 a barrel level. As oil has surged over the last few months, natural gas has fallen. This divergence in price movement should reverse and oil continues to pull back and natural gas bounces.

In addition, the government is near passing a major natural gas incentive bill. This is being championed by T. Boone Pickens. It would give major incentives to trucking companies that switch over to natural gas vehicles as well as car buyers. As long as oil stays higher in the $100 range, natural gas at this price is an obvious choice. Many companies are already switching over to natural gas.

On a technical level, the United States Natural Gas Fund, LP (NYSEARCA:UNG) has put in a bottom. This was seen last week when there was a proprietary time count followed by a reversal candle. This reversal candle was nearly engulfing. The ETF that tracks natural has retested the lows but never broke. Today, the UNG is trading at $7.82, +0.13 (+1.69%). This upswing is coming in a weak market where the SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $119.07, -2.92 (-2.39%). This relative strength also confirms a bottom.

The natural gas is a true hidden gem right now as it trades at lows. Watch for upside to continue regardless of market direction.

Gareth Soloway
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Old Nov 21, 2011, 7:00pm   #2
 
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Re: Natural Gas The Next Double

I'm not criticizing your call on Nat Gas. However the UNG is a deeply flawed ETF and suffers from contango problems so it is not a good instrument to trade Nat Gas with except in the very short term. See the performance charts vs the spot price below:

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Old Nov 21, 2011, 7:13pm   #3
 
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Re: Natural Gas The Next Double

One more example for you on why the UNG ETF isn't a good trading vehicle. When the Natural Gas spot price bottomed in September 09 and went on to make 135% return by January 10. The UNG ETF only made a 20% return in the same time period and was making loss by March 10 when the spot price was still 75% up. So be warned.

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Old Nov 21, 2011, 7:23pm   #4
 
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Re: Natural Gas The Next Double

To show that it's not all ETFs that have the tracking problem like the UNG and USO do. Here's the Gold spot vs GLD and the Silver Spot vs SLV performance charts which track the spot price very well.

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