The Widowmaker Prepares for Blast-Off

From the Desks of Ian Culley @IanCulley and Sam Gatlin @Sam_Gatlin

It’s time to buy natty gas.

A bullish momentum swing is on the verge of flashing green. And seasonal tailwinds are due to pick up as price pulls back. 

Plus, the dominant four-year cycle is approaching the next expansion phase.

Buckle up!

Check out the monthly natty gas chart with a MAC-D momentum indicator in the lower pane:

The monthly MAC-D is nearing a bullish crossover at extreme oversold conditions. This long-term momentum setup occurs after cyclical lows, marking critical inflection points in 2012, 2016, and 2020.  

Also, all three previous natty gas cycles hit bottom in the spring and ripped higher toward the end of summer – the start of the best three months of the year (August- October).

I expect stiff seasonal tailwinds to start whipping buyers into a frenzy by the second week of August:

We'll have to wait and see.

Of course, seasonality alone fails to justify taking a position. But these tailwinds fit well with the four-year cycle, supporting an eventual bullish reversal. 

Last month, I outlined a possible retest of the two-dollar level. And here we are:

Now that we’re back at 2.00, you can trade small against that level or wait for Natty Gas to develop a 6-8-week reversal pattern. 

It all depends on your trading style and time frame.

I suspect price will chop sideways for the next few weeks, so I’m leaning toward the latter

Don’t worry if futures aren’t your thing. In today's Trades of the Week, we have multiple natural gas equity plays for you.

COT Heatmap Highlights

• Commercials reduced their net-long position for soybeans by almost 35,000 contracts following last week's historical record.
• Commercials reached their largest net-long exposure to cotton futures in three years. 
• Commercial hedgers hold the largest short position in history for the British pound and the largest long position for the Canadian dollar to date. 

Click here to download the All Star Charts COT Heatmap.