Well aren’t we all glad we didn’t hold long over the weekend. NG is back where we started Friday morning. We learned something though; the market must have “sustained” cold weather to go up from here. Even with TDDs above the average, my bet is that prices will continue to fail to get above $3 for Dec or $3.25 for Jan. For now anyway.
As you can see here we actually have less storage in the ground now compared to 2013 at the same point heading into winter of 2014. I’m using this to show what possibilities can occur, no matter how slim the chances of them occurring.
To take this a step further, we’d have to look at overall supply and demand, also HDD vs weather related demand. Something I don’t have time to do at this moment. Being that it is the more important factor, storage must be monitored every year.
What else do we know? Weather forecasts are showing some cold, but not life changing cold. LNG and exports to Mexico are just not enough to boost demand. The market is looking like it will be oversupplied forever. Canada has more gas they’d like to sell to the US if only there was a need for it. Expect prices to stay suppressed.
On to the chart. Being that I’m more at home talking about fundamentals, I’m not going to say much here. Prices gapped up and failed in a big way. This is a rather large red daily candle to start the week off. This tells me more of the same, prices are still under major pressure.
I cannot say with confidence I believe that prices are headed lower. If we look at the 2hr chart, it shows a hard fall. It feels as though we are range bound here. I am most interested in a short position to see if pricing can get back to $2.5 for Dec contract. I can’t say that I would take a position today, but get if I got in DGAZ now, I would stop out at $118 today. And the position would be absolutely no more than 10% of my funds.
All I have confidence in at this point is longer term, prices stay depressed. This could be good for an options trade or spread trade. I will put this on my list. Tomorrow I should switch to Jan contract on the chart. Good luck trading.
Update. I would trail the price of DGAZ and take profits, don’t let it fall all the way back to $118. $4 trail would be my preference for DGAZ.