Fundamental Analysis
The fundamentals for natural gas can and will be a little tricky these days. Natural gas only gaining 1.0% over a five year average for storage. Consumer and commercial consumption averages on the increase and industrial usage down. How much natural gas are we going to use is the question.
The experts are looking at this late hurricane season setting up like 2004-2005 seasons. if this happens you can expect disruptions in crude within the next few months. Natural gas may piggy back off of the increase in crude oil. Any geopolitical issues involving Russia and Iran may also boost the energy sector.
With temperatures reaching the 40's in the upper Midwest will sure get the bulls looking at the natural gas charts. Seasonal adjustments for natural gas usually start in August but with the correction in crude and the USD it sure had to follow suit. Out of the past 17 years natural gas has been stronger 13 years and weaker only 4 years.
Technical Analysis
We should see natural gas touch or come close to touching the lows from last September at 8.273. December natural gas is trading at 8.600. I am looking for a dip back to those September lows and then a reversal to a minimum 50% retracement of the July/August drop. Which would land natural gas around the 10.000 mark. This also the area where the 50 day moving average is. Natural Gas may even reach the 100 day or the 200 day moving averages.
Looking for bull call spread to cover our downside risk on trading this highly volatile market. I am also looking at trading the December contract for the next 88 days. The December options expire on November 21,2008. Looking to buy the December Natural Gas 1080 call and sell the December Natural Gas 1170 call for 100 or $1000.00. If filled at this price would give you a 1 to 7 risk to reward ratio. Total loss would be $1,000.00 and the total profit would be $6,000.00. These figures do not include commissions and fees.
Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Transworld Futures believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.Futures trading involves substantial risk of loss and may not be suitable for all investors.
To contact Jimmy Tintle email is jimmy@transworldfutures.com or reach him by phone at 1-877-843-4519. Transworld Futures offers a wide variety of trading tools, webinars, and simulated trading. We also various types of accounts from deep discount online trading to managed futures, and FOREX accounts.
