Morning Update Dec 17, 2019

Seems everyone is looking for a reason to go long. Year over year S/D numbers look relatively good, mostly thanks to reduced production numbers and continued growth in LNG exports. All that is needed now is some cold weather to send prices higher. I’m still on the fence with going long. I think I’m going to go ahead another small UNG position since short positioning is so high, pricing can’t fall a tremendous amount lower.

For example.

NG1 and COT positioning at Spreadcharts.com

Comparing NG continuous chart from late 2015/ early 2016 to now, we see speculator positioning is similar between these dates. The lowest point was the last posted report. This tells me it’s relatively safe to go long. This is where I’m hung up (on positioning). Fundamentals will work themselves out.

NG Futures chain from Schwab

the NG continuous chart above, when it bottomed out on March 4th, 2016, this was NGJ16 contract. Right now NGJ20 contract is the lowest priced contract already at 2.186 (at the time this screenshot was taken). So keep in mind Jan and Feb contracts closed at or above $2 (Jan currently priced at 2.315).

NG1 vs UNG on daily chart going back to 2015/16

So going long here could still be very hazardous, as shown above. When compared to 2015/16, I have NG pricing start the chart similar to current pricing (2.3ish). This is a very good comparison because the price of NG fell all of 2015 as it is now, and is near the similar pricing at a similar time of year. This is all to show how much further UNG can fall from here.

So when NG was around $2.3, UNG was near $45, and as NG falls to $1.611 in March of 2016, UNG falls to almost half its value to $23. This is a huge hole to dig out of. If you scroll back up to COT (managed money) positioning, it shows shorts are the strongest in October of 2015,. Even though short positions lighten up, the price continues to fall. Current COT positioning is the best thing the bulls have going for them, but it isn’t a magic bullet. It does tell me that as long as COT positioning is at this point, and has shown such persistence to take this stance, we can’t go a lot lower. There just isn’t enough new short positions to push prices a lot lower.

So on a macro scale, I’m about to go buy UNG with 20% of my funds. This is quite possibly the most reckless position (due to size) I’ll have taken on since Nov 2017. I hope I dig myself a hole here to show how I’ll get out of it with a profit. We’ll see. I hope today’s post isn’t too convoluted.

Oldinvestor

Morning Update Dec 16, 2019

What we know

  • Production is has weakened at least for now
  • Currently it is cold out, raising HDD
  • The forecast isn’t showing cold coming in the near future
  • Managed Money remains at record short positioning

I believe these would be the key elements to start this week off. This is not so different that any other week. If production strengthens, the price should drop; if the weather forecast turns colder, the price should rise. These variable, to me, make it difficult to have confidence in a direction.

NG1 Dec 16, 2019 on 2hr chart at Tradingview.com

The chart isn’t helping. Pricing is at a crossroads here. It would appear that pricing should break out here in either direction. I lean bullish due to pricing and weakness in production. I’m not yet willing to buy anything based on that feeling. I will remain out and wait to see what happens today.

Oldinvestor

Morning Update Dec 13, 2019

Well… Prices failed and the weather update stinks. More so, the price failure happened at the time of the latest ECMWF forecast update. It would be fairly safe to say, this caused the price of natgas to fall. The question is, where from here?

NG1 Dec 13, 2019 on 1hr chart at Tradingview.com

Prices are still staying in the large downward channel and they have broken the previous low of the small up trend. I believe I’m going to exit my longs and sit this one out. I have to say, this week was not the right time for a long upward trend. Managed money positioning was set up for a long run, but there just wasn’t enough of a trigger to get us moving.

I’ll place a stop at $17.17 on my UNG position. If this does not trigger, I may sell at the end of the day or decide to hold. The next ECMWF comes out in the afternoon, and I’ll have decided by 3 pm Est time.

Oldinvestor

Morning Update Dec 12, 2019

Welcome to another scary Thursday edition of the ngetf.com morning update. I am as paranoid as ever. Hence only 9% long currently, and in UNG at that. Prices are trending up still, this could be a good sign.

NG1 Dec 12, 2019 on 2hr chart at Tradingview.com

Though I’m not yet a technical master of charts, I know there is a common idea that once the price breaks below support, that same line can become resistance. This appears to be happening with NG now. Also the month-long down channel from early November is converging with the upward sloping line of resistance. Being that I am green still, I cannot say this is significant. I want to believe if we break above this area around $2.35 NGF20, we’ll have longer run in the $3 direction. I still don’t believe the market is ready to go to $3. Storage and the supply/demand balance is still too weak for that.

From a fundamental view, the ECMWF (weather forecast) has given in to showing a little more cold coming across the US. This will of course translate into more demand, but will only last so long. This may very well be why prices jumped around the time the ECMWF updates its forecast last night. But that move in pricing may be all we get out of a weather update. The market is still oversupplied. Production has been stalling. I may have said yesterday, this could be a temporary low in production. I feel like that broken record. There isn’t a lot more to say about this currently.

I’ll be holding my 9% UNG position and I’m willing to let it ride some today. I will place a stop, but only at $17 today. I want there to be a clear signal that the price is going down. I did get stopped out of my QGF20 position yesterday right at the bottom of the day. It was at a small gain, so I have to be content with that.

I’m doing my best to transition to learning technical indicators in the market and stick with the trend. This week has been difficult for me so know that I’m soaking it in and will do my best to adjust. It’s a hard pill to swallow when you’re wrong in front of everyone.

Oldinvestor

Morning Update Dec 11, 2019

First off, what do we know (or think we know 😉

  • Oversupplied market
  • record short positioning among managed money
  • Weather whipsawing, but close to average
  • LNG still to look forward to (biggest growth in demand)
  • Production is showing signs of stalling (but… it probably won’t fall for a while)
  • Pricing is low, but IMO just below of being “fair”

So my take at this moment.

NGF20 Dec 11, 2019 on Daily chart at Tradingview.com
NGF20 Dec 11, 2019 on 2hr chart at Tradingview.com

It appears we are still holding, and of course I’m holding long. I want to add to my long position, but I’m not going that far out on the limb here. There is a slow grind higher, but there is also no fundamental reason (like weather) to climb any faster. This makes me think that if we do get any kind of cold shot, it will give long position to take over for a short time. This is still a long shot, since it must get cold and we also run the risk of a warm spell that could send prices to $2.

LNG is really too distant a factor to consider right now, the market is oversupplied and is still on course to an eventual $2 without a fundamental change. I want to say there will be plenty of time to react to these changes. We shall see.

As for today, I’m holding my long with stops kept at $17.1 on UNG and I’ll place stop on my QGF20 position to $2.24. I’m only hoping to fill this gap and then evaluate an exit price; If I were to just pick a number right now, that would be $2.40. Without serious capitulation, we are not going to $3. Oversupply… Keep that stuck in there.

Oldinvestor