Natural Gas - Trade Stocks

Natural Gas

By Wed, Mar 18, 2020

Dear Trader,

I hope everyone is staying safe out there.

Wash your hands, self quarantine, and be responsible. That’s the theme of today’s chart of the week — responsibility.

We’re seeing a bit of a bounce so far today, but there isn’t any evidence yet of a bottom for stocks.

Stocks up and down.

A LOT.

They’re in no man’s land, which means stocks are not an asset we want to be involved in.

Bonds have a very high negative correlation (which we took advantage of), and are seeing a lot of ups and downs as well, so we want to avoid those too.

What we are looking for is UNCORRELATED assets.

Things that will move up and down regardless of stocks and bonds.

That’s Natural Gas.

I’m looking at this Natural Gas futures chart and really love where natural gas is right now, especially compared to other asset classes like gold, commodities in general, crude oil, S&P 500.

(Don’t worry, if you don’t trade futures, I’ve still got a recommendation for you.)

Looking at this chart, this is EXACTLY where natural gas TRIPLED in 2012.

In fact, I predicted the move on national TV. Back then I called it a rip your face off rally right before it happened.

Is that what I think is coming now?

Not necessarily, but I do think natural gas prices will at least DOUBLE.

So for Natural Gas futures, we are LONG at $1.61 and taking profits around $3.50.

Now, if you don’t trade futures, you can still take advantage of this with United States Natural Gas Fund ETF (UNG).

It’s not as leveraged as futures contracts, and won’t move exactly with Natural Gas, but as far as ETFs, that’s as close as you’re gonna get.

But to be clear, we still want to use the Natural Gas futures chart for risk management levels.

If we’re not above $1.61 in natural gas we don’t want to own the ETF OR the futures contract, but if we’re above that we want to be long in either Natural Gas futures or UNG (or both) and take profits when natural gas gets up to 3.5.

Til next time, stay safe everyone.

JC Parets

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About the Author

JC Parets, founder of All Star Charts, specializes in finding the most opportunistic risk vs. reward propositions while at the same time bringing a top/down approach to the marketplace whose wide spectrum is rivaled by few. JC begins with a long-term global macro perspective and then works his way down to the individual sector and industry level before ultimately isolating the stocks that best portray a particular thesis. Price is the most important technical indicator, but JC uses supplements such as Momentum, Relative Strength, and Fibonacci analysis to complete the process.