How’s that Natural Gas Rally Coming Along?
- Posted by JC Parets
- on July 23rd, 2012
We saw a nice little 60% move in Natural Gas prices over the last three months. But was that it or are we still going higher?
It looks to me like they put in a pretty solid base that took 6 months to form. So the setup is there. We have a clear neckline around $2.75 that’s now been broken. The month-long consolidation around those levels has allowed the 200-day moving average to flatten out and the rising 50-day to catch up to higher prices.
Here is a daily bar chart showing the $3.60 target:
We achieved this target by taking the distance of the Head to the Neckline (2.75-1.90 = 0.85) and adding it to the breakout/neckline level (2.75+0.85 = 3.60). For Risk Management purposes, I would be watching this 2.75-2.80 level where the neckline meets the 200-day moving average. I would not want to be in NatGas if prices are trading below that. Anything above it is a go.
We’ve been on the Natural Gas bandwagon for most of this year and it continues to be one of the few trending assets out there. We see it as a lot easier to buy dips in trending assets (and short downtrending assets) rather than get whipsawed around in a rangebound market (i.e. S&Ps).
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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