After trading as low as $4.788 natty has bounced back to $4.8520 and may be setting up the right side of a head-and-shoulders pattern on the daily chart.From FinViz:
The emerging chart pattern still looks correct.
$4.6190 last up 10.8cents. The development of a head-and-shoulders means more upmove to create the right shoulder before the bottom falls out.
From Turnkey Analyst:
Natural Gas Trading and Mental Accounting
It has been a long, cold winter on the East Coast. This has been very good for anyone long natural gas.
Below is a chart, as of February 26, for the April natural gas futures contract during 2014:While it’s been a nice ride overall, prices have obviously fallen rapidly recently.
The February 26 version of the WSJ Journal included an article about this dramatic decline in natural gas prices, with the dramatic headline: “Futures Prices Decline 17% in Two Days as a Chill Sets in for Natural Gas.”
Within the article, Gelber & Associates was quoted as commenting in a research note:
The downward move started a chain reaction as long traders quickly exited their positions while they were still profitable.So the traders wanted to get out while the trade was still profitable? Okay, makes sense.
Later in the same article was the following observation:
Analysts and forecasters said the underlying dynamics that have driven this year’s rally in natural-gas prices are unchanged: forecasts for extraordinarily cold weather through the final weeks of winter remain in place, suggesting continued strong demand for heating-related fuels.So the underlying weather-related fundamentals have not changed in the market.
Wait, what?
How can it be that prices have dropped 17% with no material change in the fundamental outlook?Fundamental unchanged…Price down 17%?!
The article seems to suggest that the answer may have something to do with traders wanting to lock in their gains....MORESee also:
Feb 25
Updated--Goldman Sachs on Natural Gas
Feb 24
Natural Gas: As the British Nature Shows Used To Say...
