Morning Update March 9, 2020

I’ll go ahead and add to UNG now to put my holding back to 75%. I’m publishing this now, then will finish with the rest of this post. Buying now at $12.65 with roughly 5-6% to put me back at 75% long on UNG.

Ok, my account is down about 11% right now, this is not too bad considering all that has happened. This may be the worse down trend I’ve survived, and the best I’ve ever done surviving a down trend. Not to mention, what was once far behind the S&P when I began sharing this account, is now about even with.

Geez, I’ve been assigned on one leg of a UVXY spread I took. hmmm, guess I’ll get to manage that soon. Warning to robinhood traders. When you are assigned in your robinhood account, they will not show a short position in your account of -100 shares, and they will not allow you to manage it first thing in the morning. They will, however, take hours to manage the position, and there is a good chance they will lose you money, where you might have actually made money. I was assigned on SPY a while back, I knew what had happened, but was not capable of buying the shares of SPY because the account didn’t show -100, only a credit of about $33,000. Robinhood also would not allow me to sell the other side of the spread I was holding to cover the whole thing. It was really quite frustrating. Something most major brokerage firms would not allow to happen. The whole thing was not that big a deal on a grand scale, but it was huge for a $500 account. This UVXY option that has been assigned is with Schwab; I’m showing a short postion that I can manage at market open. I will lose a couple hundred dollars, but that was already true of the options spread I took in the first place. I cannot say this will always be the case with robinhood, but that was not a good experience for me because I was not given the opportunity to manage the trade myself.

I think most of the financial market is scrambling in one way or another this morning. I feel their pain a bit. I think I’ve said this before, I should probably stick to gas. About that… Weather is actually showing some bullish signals, but literally no one cares! haha

Production is showing a recovery from the 1 Bcf/d drop that I spoke of the last few days. So the price of oil, haha, there’s an over dramatic mess. So the price of oil was/is down some 20% from Friday. I remember thinking oil production is going to just stop or fall like crazy. This is really not the case, production may actually increase. The only way for a company that drills and produces oil to make enough to pay their debts, is to produce oil. Drilling rig counts are going to drop drastically and even some completions crews will be put on hold. Production will continue, if not increase because the oil or gas producer has to sell oil/gas to pay the bills.

hmmm, I must go. I’ll continue this rant later. still holding UNG with 75% of funds. Looking for $1.5 for Natgas pricing to get all in.

Ok, back… I see gas has decided to move higher, in a significant move. It would appear the market isn’t going to $1.5. It is forward thinking here and some traders want what they would consider to be a bargain right now.

The market is about to open and I’m about to get busy. Drilling rigs will fall, oil will take forever to slow production. Gas is already falling. The real story right now is this idea of in order to keep production at the pace it is now, a major expansion in drilling would have to happen. This is a longer term idea, like at least going into next year. The big IF right now is still the coronavirus. If it doesn’t wreck the global economy, or rather shutting down everything to prevent the spread…. Then being long on gas is worth the risk. The best thing going for the long side right now is pricing. Prices are low enough production is not going to trend up from this point forward, it’s more a matter of how much of a hit does demand take in the following months. All eyes will be on LNG exports.

I’ll be holding my 75% of funds in UNG for a while I think. I will probably shave a little off again. Maybe even later this week. Good Luck

Oldinvestor

Morning Update Feb 28, 2020

It’s time to buy. I would have bought this morning first thing, but I’m trying to make my purchases withing the 8am-8pm eastern time window that most people have. In Webull, I could have bought up some UNG below $13. NGJ20 went below $1.65. NGJ16 was the contract that bottomed out at $1.61. NGN16 bottomed out just below $1.95. NGN20 is currently $1.89! I wholeheartedly believe, if the coronavirus continues to take its toll on markets as a whole (which it looks very likely at this point), that Natgas pricing will reach $1.50. This is not so far away. Now the initial shock of the virus is currently upon markets this week, and that will soon pass. The true economic impacts of this virus are still unknown. What I like about natgas, it’s easy to manage. I’m talking about the physical gas. I would think natgas would be the preferred source for heat in tough economic times, because it’s easy to manage physically. Power plants…

https://www.wsj.com/articles/utility-jobs-shrink-as-new-power-plants-need-fewer-workers-1516021200

This above article is just one that I did a quick search on google to confirm that power plants require far fewer employees to operate natgas powered electric generation vs coal powered.

I keep getting interrupted… My mind is scrambled with work this week. I’m adding to my UNG position with 25% of funds at $13 to put me at 75% in UNG. I’m going to publish this now and try to finish this post later.

I cannot seem to find time to get down what I want, nor can a focus for the VIX begging for our attention.

My line of thinking right now is to stay long UNG and be all in if prompt NG contract hits $1.5. Anything below that and the market should get a little crazy. I’ll buy UGAZ if natgas will dip below $1.5. This time period is certainly stressful, but can be exciting and can produce profits. I have to stay on course here. UNG has been good for my account. Though I’m down nearly 10% in my account, the opportunities to go long are ever increasing. Good Luck

Oldinvestor

Side note: Can’t make up my mind if I want to trade a spread that the panic will worsen or just that it won’t recover so quickly. IV may make the decision for me. I’m not so quick yet, but the opportunities are rolling in this morning.

Morning Update Jan 24, 2020

This is not winter’s last chance to spur natgas pricing, but cutting it close when considering the forecast. HDD averages are already falling, and another month or so winter will not be a consideration any longer. The recent forecasts (the last couple of weeks) have shown spikes in HDDs, but the maps did not seem to show cold in the right areas to produced HDDs greater than the average. I don’t know weather so well, I just know what I’ve seen in the past. Now the maps look more impressive than the HDD chart. It’s really all the same, because it’s a promise of cold too far out to be an accurate prediction. Being patient none the less.

NGH20 on 2hr chart at Tradingview.com

So much for a breakout from my wedging pattern, as it laughed in my face. Price still matters. With NG prices approaching $1.85, I’m approaching “All In”. I would like to see a fall today and be all in late today. Late today, late today. Emphasis on late today. As in 1 pm – 2 pm Est. time. UNG must fall below $14.4 or I will not buy. If prices fall fast, such as UNG falls to $14, I’ll go ahead and buy if the trend looks to have bottomed there. This scenario is very unlikely given that prices have struggled in both directions above $2. Now is not much different.

Remember, production is still showing signs of stalling. Producers have said over months in the past, they will be spending less on new drilling activities. Every formation that is drilled eventually has a plateau that coincides with how many wells that are actively producing. From what I remember, back in 2017 or so, Appalachian wells turned out to be much larger producing and efficiency gains were huge. Massive even… This surprise factor has nothing left for the market. I believe a bearish surprise will come in the form of either A. pipeline additions in the Permian area, and/or B. LNG market is flooded enough, trouble begins with LNG exports and the US cannot send out enough. Pipeline additions are not really a surprise since we know they are going to happen and soon.

Here is an example of pipeline expansion. This article speaks about Kinder Morgan’s focus on expansion to Mexico and LNG facilities. That being the case, these pipelines may not help gas get into storage, but feed high demand areas of the market. This also puts pressure on the idea if the LNG market implodes, NG prices here could be valued at less than $2.

All this is said as a warning. I’m betting not so much on weather, but that LNG additions this year move along smoothly and production continues to stall or even decrease. If production just stops increasing and LNG continues to increase, prices should stop falling and rise about $2. If production decreases and LNG increases this year, I fully expect $3 by November 2020. I would not bet on that with futures contracts or options. I’m only trying to scrape in 1% at a time here.

With all that out of the way, Low prices cure low prices. Even without a big turn around in this market, there is going to be a lot of back and forth in this range or the next range lower. I welcome the back and forth more than just a major turn, because I’ve always traded the whipsaw better than anything. I will always admit I’m almost always early, but I’ve learned to managed my risk to my satisfaction.

Speaking of my position, still holding 80% of funds in UNG. I hope to take that last step into UNG today. Now that I’ve typed you to death and warned the prices may go lower foreverly, I’m going to just place a limit order to buy with the rest of my funds. Placing a limit to buy UNG at $14.4 with a hair more than 20% of funds. There was a little left over so I’m getting a couple extra shares. If this order takes, I will be 100% in with an average of $15.51 Sorry if I rambled on a bit too much this morning. Good luck

Oldinvestor

Morning Update Dec 19, 2019

I’m still long and looks as though I may be adding to my position today. Currently at yesterday’s low and we have the rest of the day. That being said, what do we have?

  • US production is still weakening
  • Canadian Imports are picking up the slack (keeping production high)
  • LNG is holding near record highs
  • Power burn looks surprisingly high (to me)
  • The market has tightened (demand keeping up with supply, but will it last)
  • Weather is being weather
  • The price (barf)

So much for continuing the trend higher this morning leading up to the EIA report. It is quite common for prices to creep up a little late Wednesday and early Thursday in anticipation of the EIA report at 10:30 Est time. If you’ve never seen it, click this text to go to it.

Weather is not helping at all. I’m not sure if or how anyone can rely on the forecast past 10 days. 11-15 days out keeps toying with the idea it will get cold again. This seems to happen as some point every year and leads people on every year. I’ve learned that sometimes you can go long on the chance weather will flip, this is not one of those times. I’m not counting on weather to help me out.

I’ve hit on this a lot, but let’s revisit production. The market is still oversupplied. Production is expected to weaken soon, if not already. This does not mean the market is at bottom. I believe $2 NG is still a very likely occurrence. I’ll share a drawing I whipped up just now.

Oldinvestor handywork using Paint! Oversupply example.

Everyone keeps mentioning how the market is tightening up. This is true, but just like a chart that bounces around on the way up or down, the supply/demand balance will bounce around before becoming under-supplied. I honestly believe we have another spell of increases in production. Take that with a grain of salt, because I don’t really know this to be true. I just can’t help but think we are not going to get the breakout we want yet. Production often fluctuates for weeks at a time, and currently the market is swinging toward under-supply, but could swing back any time. I should try to find more info on this.

I’m running out of time, quickly, LNG. LNG continues to be awesome, which leaves a lot of room for disappointment here. All the LNG facilities are running great, until one doesn’t. Just keep this in mind, a bearish surprise could lie in wait here. Something to look forward to would be LNG additions for 2020, though this still doesn’t help us right now.

LNG consumption at RonHenergy.com
LNG export facilities – planned additions at RonHenergy.com

I don’t have access to much power burn data and haven’t looked at EIA much. I just know it’s very high right now. Ron H also has some info for this as well. I’ve shown winter months to give a comparison of how power burn looks in winter, and right now seems high for the amount of cold we’re seeing in the US.

NG demand for Electricity Generation at RohHenergy.com

On to the price. The part I’m not so good at. Daily chart looks to be following the channel and will be headed to $2 soon.

NG1 Dec 19, 2019 on Daily chart at Tradingview.com

Looking at the 2 hr chart, we also look doomed as well. There is a small chance prices hold here, and get some help from the EIA report. This again is not something to count on.

My real assessment is that NG is headed lower. So why not just short it? Pricing is low enough to be more painful to producers than to my being long a 20% UNG position. Pricing right now should be more painful to long NG traders than to me with a 20% UNG position. Pricing is in a range to fix pricing. Managed money position I mentioned in my Dec 17th post is still going to be near or maybe at a record short ratio of longs vs shorts. I’m building a position. I’m feeding an old habit here that I refuse to kill off. A trader would tell you I’m an idiot, that I need to set and use stops here. Which is probably true, if I did that I might make more money. I’ve also had success by doing exactly what I’m doing and I’ve adjusted my method so much that these days I come up short because I’ve not taken a large enough risk on the trade. This time will be no different. I’ll build up my UNG position, the market will turn, and I’ll make another % on my account; the way I know how.

I still have an order in to add to UNG at $17.05 with 20% of funds. I’ve cancelled it. I’m afraid the market isn’t going to give me what I want ($17.05) so I’m going to adjust here and add 10% of my funds now and wait to add 10% more on a dip (if it happens.) Watch for updates on Twitter.

Oldinvestor

Update: 10:02AM Est time. I bought UNG with 10% of my funds at $17.17. Currently my average is $17.5. I’ll place an order to sell the shares I just bought at my average of $17.5. I’ll also place an order to buy at $16.93 with 10% of funds.

Current Orders:

Buy: $16.93 with 10%

Sell: $17.5 with the previous 10% purchased this morning.

This will help manage the risk on my account if I can get sold and leave some to make money on if the market decides to turn here. I’m fine with going lower, we’ll just have to be patient if that happens.