Friday, August 21, 2009

Could this be the first bullish chart for natural gas? And: "Natural Gas - Was Thurs Aug 20 Capitulation Day?"

Natural gas futures are trading down another nickel (1.73%). Catching the turn is a very tough proposition but we are closer to the bottom than the top. Two from Oil and Gas Investments Bulletin:

Could this be the week that natural gas bulls have been waiting for? The week when net injections into storage are so much below last year’s or the five year average - that they believe the coming production-falls- off-a-cliff scenario has started, and be the sign that natural gas prices will rise?

And would that give natural gas stocks a run up?

I ask because when looking at a chart (from Peters & Co., a Calgary brokerage firm specializing in oil and gas) of the last five years injection statistics, I see a big anomaly. In 2008, net injections of natural gas in the US spiked over these same coming three weeks. Here is the chart:


Will the market interpret a 50 or 60 bcf injection - much lower than those high numbers from last year - as a sign the long awaited natural gas market has arrived?>>>MORE

Today he follows up with:

Or did investors come to believe that the natural gas price is a runaway train on a dead end track?

Despite a natural gas injection this week (52 bcf) that was smaller than forecast, and quite a bit less last year’s 88 bcf injection (and less than 5 year average injection of 64 bcf), natural gas prices tumbled.

Investors focused on natural gas inventories inching closer to being full. The fear of natural gas companies having to shut in production en masse, in the near term, took over sentiment.

While the natural gas price tumbled, natural gas stocks, however, did not. The Amex Natural Gas Index was up almost 1%. That has me intrigued.

Negativity hit a new high today on natural gas. Look at the volume on the ETFs in the US and Canada. UNG-NYSE traded had its biggest volume day in two months and set a new low. Investors were clearly voting with their feet and walking. In Canada, the Betapro Horizons 2x leveraged natural gas long ETF, symbol HNU:TSX, had record volume and dropped 10% to dip under $3/share.

These are good indications of capitulation, which is “a volume surge after an extended decline reflects a selling climax or capitulation that exhausts selling pressure”, according to


But of course, it could get worse. Calgary-based, First Energy Capital Corp. Analyst Martin King, was quoted in a Reuters story today saying “This is the precursor to a bit more of a pullback down into the $2.25 to $2.50 range....MORE