This is the current forecast 6 hours from now. We see the lines move up under AK (Alaska) and the down across the midwest and sharply swoop down into the Northeastern US. This is the perfect pattern for a spike in NG demand. Since this is the forecast for 6 hours from now, it’s pretty much guaranteed to happen. I believe in 10 day forecast, beyond that it’s an educated guess, but still about as much a guess as truth.
This is the 120 hour or 5 days out, you can see the lines are flattening out and no more cold being slung down into the Northeastern US. So cold temps in high population areas will subside, people will not burn as much gas to stay warm and consumption that had skyrocketed will drop back to about average use.
I should confess I was looking at NG1 and thinking gas had a ways to go before reaching the 20EMA. Looking at Dec contract without the influence of NG1, the price has already crossed 20 EMA and touched the 50MA on the daily chart. Being that I’m a bit green to technicals, I will look into further the use of NG1, which shows Nov contract until expiration, then Dec. For now I’m going to stick with displaying each contract and not use NG1 for short term technicals.
Moving on… the 2hr chart is showing some strength. I’d say the market has another hour to wake up and really give us a direction. I believe overall the price of NG will continue down this week, but not at the same pace as yesterday. There will be some bumps along the way, as normally is the case. The NG market is still far over supplied, weather forecasts haven’t given a signal to get excited, and the trend is simply down right now. I remain with 3.5% of my funds in DGAZ with a stop at $105. I think this is a bit close, but I don’t want to lose that profit so $105 it shall remain.
So I was off a bit with the intersection of 20EMA and NG1 price falling.
I misjudged where NGZ19 would meed up with 20 EMA on the daily chart. This is great, there is roughly 7 more cents for Z19 to fall, potentially sending DGAZ up another $7-$8. I chose to reduce 50% of my position first thing this morning at $107, this leaves 3.5% still in $DGAZ.
This chart hasn’t been updated yet, but it will show further weakening in HDDs, which in turn is helping drive the price down. Basically that cold cluster over the Northeast US is going to hit us hard, this week and by next week we should be seeing more average weather. Weather is never average, but you catch my drift.
Weather is my main reason for holding short into the weekend, but this is my reason for confidence in a Sunday gap down. I probably should have explained this friday afternoon when this report came out. Nonetheless; I did mention on twitter I would be holding. Short positioning had decrease drastically with this report, showing there is plenty of new shorts to be added. Also…
The two hour chart seemed to indicate the market was looking for reasons to drop. Thursday’s EIA report was strong and on or better than most estimates, yet NG did not breakout and hold and up trend pattern.
So culmination of weather, short positioning and 2 hr, led me to have confidence in the short side. Today’s Daily chart shows we have resistance around $2.6 with 20 EMA. I’ll stick with this and place a stop at $105 on DGAZ for the day. I want to keep the gains I have so this stop is close, it could get taken. I’m good with that, the % gain this time around has been closer to 1% on my account so I’m happy to place a close stop.
I’m sharing NGZ19 from my Schwab account today, side-by-side of 2hr and daily charts. You can see that 2 hr is approaching upper BB. You can also see Dec contract has failed so far to reach upper BB. I took a small amount of my position of DGAZ off yesterday and looks like that was ideal. I’m happy to add that back in this morning at $94. I will try and keep an eye on this and get out if DGAZ begins to fall here. Weather is proving to be a unpredictable as usual. Cold concentration over the Northeast US is still holding true… With this week overall and yesterdays failure to break out going up, the market is ready to tumble once again.
Any bearish activity in the face of bullish fundamentals should be your first indicator; once those fundamentals turn bearish, it’s off to the races. No stops today, I’m hanging on for the ride from here.
Lets fade the gap. I’m not counting on it today, but maybe by tomorrow. DGAZ is hanging in there nicely. If EIA is not overly bullish today, my hope is DGAZ gets to $106+ by tomorrow. Just have to wait a few more hours and see.
Weather is giving a look at more normal temperatures. Daily chart looks good, 2 hour chart, not so good. If we can break down today, should at least get that red line and meet the 20EMA.
2hr chart showing some support, which you might exit here to try for a better position. I will be holding DGAZ with the same stop at $85, this time I’m putting the stop on my entire position. I will be careful around EIA report time, 10:30am Eastern time. I may remove the stop during the report and manage it manually. I will post if I think I should dump it. I’m hoping if DGAZ bounces, we don’t get near $85 so I don’t have to make a hard decision. We’ll see how it goes.
Zooming out to the weekly chart, we can see gas pegging multiple MA here. The price gapped higher, and this is a common theme for falling back to “fade the gap”. I don’t have a lot of confidence that gas will turn around here. I am going to put a lot of emphasis on weather. Watching weather in relation to NG over that last couple years, it seems the hardest thing to occur is also the most desirable. When cold comes down across Canada and hits the Northeastern US. It has been rare to occur and seems impossible to linger in that one location for long, yet the cold remains in the forecast.
Going off of my twitter feed here, I bought DGAZ at $117.8 with 2% of funds, and didn’t take my own advice of placing a stop at $114.5. I added to DGAZ yesterday at I believe $88.8 with 5% of funds. This is not an ideal trade and I should consider another stop (at least on the 5%) at $85-$86 on DGAZ. I’ll leave it at that. If we do head back down, I’ll switch back to daily chart for potential support areas of NG.