Thursday, November 26, 2009

Natural Gas – U-Turn Follow-up

Natural Gas – U-Turn Follow-up

The writer elaborated on his thoughts about the trend for Natural Gas in a previous article for Seeking Alpha posted November 23, 2009. The volume of interest and comments that this article generated surprised the writer. It appears that natural gas is a very hot topic and that there is no shortage of opinions about which direction natural gas will take from here. Also the Horizons Beta Pro Nymex Natural Gas Bull ETF (HNU:ca) appears to be a hot search topic on as depicted on a snapshot of the search cloud below.

Figure 1: Search Cloud for Stockcharts on Nov 25. Interest in HNU ETF was extremely high.

If the market participant was bullish about the natural gas price prospects, the double leveraged HNU ETF would be one of the choices available.

As chance would have it, Tuesday November 24th, 2009 was a hot day for the markets generally and for natural gas in particular. See the three charts below depicting the daily, weekly and the point and figure aspects for NYMEX Natural Gas Futures.

Daily View

Figure 2: Natural Gas Futures at NYMEX. Note the bottom set on September 4th, 2009. A gain of 6% was registered on November 25th, 2009.

Weekly View

Figure 3: Natural Gas Futures at NYMEX in a weekly view.

Point & Figure View

Figure 4: Point and Figure Chart for Natural Gas Futures. Note the target objective of $11.25.

Natural Gas gained 6% for the day while the HNU ETF gained a remarkable 15%. The last chart gives the writer the most telling information. The algorithms are predicting a target price for Natural Gas of $11.25. It appears the bottom set in early September is still valid, and until the trend upwards is invalidated sufficiently, the price target is still standing.

What should one make of this? There are many opinions as to the sagging state of natural gas pricing; the low prices are caused by the surplus supplies, spanking new shale gas finds, the sagging financial systems or a combination of all three. For the writer, he believes all this information is already priced in, and the market is looking forward, as always. For all the criticism of the market being irrational, the market is the great dispassionate assembler of all known information and spits it out for a bottom line in the price. The point and figure chart has already dispassionately spitted out a target price of $11.25. The writer will stay and enjoy the ride.

Disclosure: The writer holds a long position in HNU.

Marco G. November 26, 2009

Important Disclosure

The information and opinions contained within this document reflect the personal opinions and views of the author and should be view as information for thought and entertainment only. The author may from time to time have a position in any of the securities mentioned. Any material within should not be construed as accurate or reliable or be utilized as advice for investment or business purposes. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. There are no guarantees of the accuracy or completeness of the information contained herein. These writing are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not receive or request compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

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