Morning Update Jan 27, 2020

I’m a bit disappointed with where prices are this morning. I don’t like following weather, and this is why. Though it could be easily argued that current prices are warranted, it is still a bit disappointing. I cannot really expect prices to rise fast in this market; there has been 0 forward looking in the bullish direction. In other words, few traders expect the price to rise, most believe that prices are exactly where they should be. I agree for the most part. With that said, if cold does develop and the current forecasts stay cold, prices should grind a little higher. UNG could easily make it to $15.85.

NGG20 on 2hr chart at Tradingview.com

Ok, starting over on this paragraph once again. I’ve had a cold and conveying this message is a bit more difficult. It is quite simple, Step 1. Market mentality is bearish (prices will go lower). Step 2. Prices are already very low, this limits the bearishness (keeps prices hovering here). Step 3. Factors that change supply and demand, like weather will push the price around within the market mentality’s limits. I see that we are at the top of the range because the mentality is that we head down without more impressive demand, which would come with cold weather. Prices went right to resistance and started falling, which will feed the bearish market mentality.

EIA weekly natural gas storage report for week ending Jan 17, 2020

With the latest storage numbers higher than the 5 year average and building faster than normal, this also feeds the bearish mentality. Low prices will ultimately cure low prices, I would argue the market is just entering this area. Looking back to 2016, prices can easily drop lower and quickly, but there is also a lot of noise and rebounds for those low prices that are seen. I’m counting on this happening if I’m going to start trading UGAZ. I believe $14.4 is near the perfect price to finish getting into UNG. From that point on, rolling to UGAZ should be very interesting, and for me, very fun. Nothing quite like skipping along bottom. Though I haven’t scraped any profits yet, it may come with UGAZ. That is if the market will go ahead and drop on down…. Patience.

So I think it is clear, I am 80% in UNG with an average of $15.85. I will place a limit to sell 38% of this position at $15.85, reducing my position to 50%. If prices slide lower, I’ll enter UNG with my last 20% of funds at $14.4. If prices happen to rise and do not look like they will make it to $15.85, I may sell a lesser amount than 38%. I am not yet ready to make that decision. If I do, it will be posted on Twitter. Good luck

Oldinvestor