Watch Out Natural Gas Holders
Technical Outlook
Natural gas Futures completely tanked on Tuesday dropping around 10%. The technical picture is looking grim as it appears that natural gas is rejecting its previous highs. There is also was a major divergence between the price of Nat. Gas Futures and both MACD and RSI on the weekly candles. That is a bearish indication. This probably added to the downward momentum of todays sell-off. You can see the divergence in the charts directly below.
I also wanted to point out in the chart below that price of natural gas closed on Tuesday just above the 20-day moving average. For all you Bollinger band traders this is the mid Bollinger band. if the price dips below this then it would make the charts look even more bearish.
So basically this downtrend looks like it is confirmed after Tuesday’s big sell-off. So now the only thing to do is look for potential support zones where we might see some buyers stepping in. The next closest zone of demand to watch is around the 7.50-7.45 area. The next area of interest to watch after that is around the seven dollar price point +/- 10 cents. These are the two areas to where you should watch for potential friction on the way down or a possible bounce point. Ive highlighted these Areas of interest in the chart below.
Macro Outlook
The initial rally and natural gas was mainly due to the energy crisis in Europe caused by the supply chain issues resulting from the Russian war in Ukraine. These energy supply chain issues are slowly solving themselves naturally. There is even talks of the Germany and will have its natural gas storage situation solved before winter. Also supplies of natural gas are increasing in the US while the forecasted demand for the gas is decreasing. These are bearish macro aspects.
And also just today there was headlines about the EU potentially drafting a lot of legislation towards this energy crisis situation. Basically the EU was going to throw a lot of money into trying to solve this energy crisis. The news came out today and could possibly have provided some downside momentum onto todays sell-off. This could very well be rumors but this news made a lot of sense to me after seeing the big sell-off.
Most People are feeling bullish because of all of the headlines about the Nordstream natural gas pipeline being shut down. This doesn’t seem to be bringing natural gas prices back up. And if the trend is down then we must follow the trend.
The rally in natural gas may very well continue. It is possible that natural gas could reach new highs. But right now the trend is down at least for the short term. So If you are a long-term holder of natural gas or natural gas related equities then you might want to cover your long position. And if you are a short term trader then there might be a good opportunity to build a short position in some natural gas related equities. Here are a few tickers to look out for.
$SPDR S&P 500 ETF(SPY.US$ $Invesco QQQ Trust(QQQ.US$ $iShares Russell 2000 ETF(IWM.US$ $VIX Index Futures(MAY4)(VXmain.US$ $Gold Futures(JUN4)(GCmain.US$ $Powershares Exchange Traded Fd Tst Db Us Dollar Index Bullish Fund Etf(UUP.US$ $SPDR Gold ETF(GLD.US$ $iShares Silver Trust(SLV.US$ $Ishares Iboxx $ High Yield Corporate Bond Etf(HYG.US$ $Ishares Iboxx $ Investment Grade Corporate Bond Etf(LQD.US$ $iShares 20+ Year Treasury Bond ETF(TLT.US$ $Crude Oil Futures(JUN4)(CLmain.US$ $Hang Seng Index(800000.HK$ $CSI 300 Index(000300.SH$ $SSE Composite Index(000001.SH$ $S&P/ASX 200(.XJO.AU$ $FTSE Singapore Straits Time Index(.STI.SG$ $SPDR Dow Jones Industrial Average Trust(DIA.US)$
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warrior-sailormoon : I am holding long. May i know what does that mean by “cover the long position “
Enlighten me pls. Thanks SpyderCall
warrior-sailormoon : Looking forward tomorrow G7 meeting (Thursday or Friday) for price cap n Russia’s action to this matter and OPEC plus immediate action on the oil price crash. I think most of the solutions will resurface once price cap is being discussed
SpyderCallOP warrior-sailormoon: It can be a lot to explain. But it is a strategy using options. Basically if you are holding a long position and you don’t want to sell it when the price starts dropping then you would cover your long position by selling and options call contract. This way you can retain the gains until the price starts moving up again. When the price starts to uptrend again then you would buy back the call that you sold. That is basically how it works.
SpyderCallOP warrior-sailormoon: Possibly. I can see that happening
warrior-sailormoon : Holding super long almost to the max but mid term play (super long just to lower down my risk) Either i DCA down my long or cut lose and enter again but my gut tells me to hold for awhile more as OPEC can’t be sitting looking the oil crash as they’d mentioned on Monday’s meeting and todays news also reiterated a simple tweak will be made to keep oil price to its fundamental
warrior-sailormoon : Actually I’m started to freak out but try to stay as calm as cucumber
BeBlessed : Will the movement of natural gas (currently bearish) affect the movement of indices?
warrior-sailormoon SpyderCallOP: Good idea. Sell first and do nothing while waiting for the price up again and enter at the same point where i left.
SpyderCallOP warrior-sailormoon: It’s can be difficult to execute the strategy perfectly. But that is how all of the pro traders do it
SpyderCallOP BeBlessed: Not so much the major indIces. But definitely the sector ETF’s associated with natural gas. also oil seems to be dropping right now so watch the ETFs for crude oil as well
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