Gas Petrospective – October 5, 2011
Natural gas prices rallied 2.1 cents per million Btu yesterday, as the general asset liquidation lost some of its force. With prices recently at their lowest levels in a year or more, bargain-hunting and value-buying entered the market just as soon as there was any short-covering. This type of buying will always be on the lookout for stopping points or any signs that the vertical decline has paused to take a rest. These traders do not want to be caught over-playing their short hands, so they cover shorts, buy futures against cash commitments, look for low-priced material that can fit various needs or just to fill up empty line space over the winter.
Prices are certainly oversold enough for this rally to last another day or two, but we would be surprised if it managed to make it that much beyond that. The factors that brought prices to their current levels – heavy shale-gas production, poor baseload industrial demand, shoulder season space-heating or cooling limitations and renewed commitments to the short side by trading funds are all bearish factors here.
We would ideally like to see a decent rally back over $3.75 to get short as a long-term holding. That might not be possible, but it would strike us as being a good place to begin any short position. Of course, if one could sell more, on a scaled-up basis to $3.90, that might be even better.
This is a good market to be short in, although this is not an easy market to trade.
Technical Recap
Natural Gas Options Report
Premium Subscribers (click here to register):
Volumes & Open Interest
End Of Day Straddles
Trade Blotter
Settlements
To view our energy news and articles on your PDA or mobile device, click here.
-----
About FMX: FMX Connect is an information, data, and analytics portal for Commodities. The portal provides an all-in-one package including essential market data, independent third party research, industry news, and commodity trading tools. FMX Connect provides efficient, effective, and thorough data that bridges all aspects of commodities onto one screen. The Result; A user friendly application for hedge fund traders, OTC brokers, individual investors, and industry participants.
-----
Note: The information presented, while from sources generally believed to be reliable, is not guaranteed and may not be complete. FMX | Connect makes no representations or warranties regarding the correctness of any opinions or information. Past results are not necessarily indicative of future results. Nothing in this report should be construed as a representation to buy or sell shares, futures or options, which contain considerable risks. For internal client distribution only. Any reproduction, re-transmission, or distribution of this report without permission is prohibited. Media correspondents or reporters may not quote any one page or section in its entirety and must attribute all quotes, ideas or concepts herein. Copyright FMX | Connect, ©2009-2010. All rights reserved.