Morning Update Jan 22, 2020

What we know

  • Oversupplied but stalling
  • Weather forecasts could be more bearish, but not very likely (surprise to up side)
  • Prices are awesome
  • Be patient
NG1 on 2 hr chart at Tradingview.com

Prices are moving sideways again. I suspect a lot of technical numbers like $1.83 and $2 are being thrown around right now.

There isn’t much to say about the oversupply, the EIA Drilling Productivity Report shows signs that most plays are weakening. It is odd to me that Haynesville has added DUCs and production. Unlike Permian, Haynesville is mostly dry gas and shouldn’t pushing gas in order to get to the oil. It is possible there are many contracts in that area in connection with LNG with hedged pricing. This is what I’m left to assume.

Weather is weather and the forecast is showing consistently warmer than normal temperatures on the way. Normally I would be very bullish on such a forecast, I’m already too bullish to increase my position at this point. When pricing is low and the weather forecast looks as thought it can’t get much more bearish, this is a sign for me to be on the lookout for a surprise to the up side. Being that the market is overwhelmingly bearish, I would imagine this isn’t quite as effective, but I cannot say for sure. With short positioning at an extreme and weather at a bearish extreme and price at the lower end of the spectrum, a spike in HDDs could trigger the next bull move.

Prices are low, but could go lower, that’s all I’m going to say about that. It’s time to be patient. If the price moves higher today, it’s gotta get to $15.85 for me to reduce my position. I will go ahead and place a limit to sell the last portion I just bought, which is 38% of my holdings or 30% of my original funds. For example I’m holding 50 shares in my $1000 example account. I am 80% invested and I want to sell 19 shares when UNG reaches $15.85. 19 / 50 = 38% I’m still not a big believer in this market moving a lot higher, but I will be slow to evaluate if I want to sell more than 38% when the price gets close to my average. There is still a strong chance the price moves lower before higher; I’ll be interested in buying more UNG below $14.40 if prices move there first. Good luck

Oldinvestor