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A Look at Natural Gas
posted Feb 16, 2006 at 09:29PM

Natural Gas Daily Chart

Natural Gas Long-Term Stochastics Study Chart

Natural Gas Weekly Chart

Nat Gas COT Data

I last looked at Natural Gas with some charts on Jan 18. I added the following words of wisdom..

"One could wait for one more "up down" sequence to see if you can get some bullish divergences on the weekly.

On the whole though, I would think that Natural gas is due for at least a healthy trading bounce.

For the long term I do like oil better than natural gas. Gas strikes me as being more "economically sensitive". An Iran induced oil price shock, or any kind of oil price shock could be a trigger for a recession, and I think that would hit natural gas demand. "

Well it looks like it did have an up-down sequence. But the "up" part was very weak...not even retesting the 200 dma resistance level The down cycle has been been pretty harsh, breaking down through several horizontal price support levels.

All the talk of natural gas shortages, and geezers freezing in their beds has not happened. The winter has been mild and supplies are very abundant.

Technically things are now very oversold. Fundamentals look horrible as the seasonaly weak spring season is coming. Natural gas does not really enjoy any geo-political risk premium. It's big wild card is weather and hurricane season is still a ways off.

If the economy does take a down turn then natural gas would get hit on the demand side.

So from a contarian point of view is this a good time to buy"? I don't own any natural gas pure play stocks. Again I feel oil and gold are better investment assets to buy on any weakness.

If you do buy I feel this is a place to use some stops. The COT data shows that despite the brutal haircut that Natural Gas has received, the small specs remain very bullish and the commercials still have a small net short position.

Quite frankly the ultra weak performance of natural gas makes me wonder about how painful the corrections in gold and oil may be. Again oil and gold have things going for it that natural gas don't. Mainly geopolitics,(both) fixed demand,(oil) and fiscal imbalances. (gold)

Again this is, historically, a good technical juncture to buy. But the weak price action is forboding and you have to include some kind of risk mitiagtion into your trading plan.