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Choosing The Right Moment To Buy NatGas

I have made the point in these pages several times that sometimes, for a trader, square is the best position. There is often a feeling among those that trade, whether from home or in a dealing room, that they should always be doing something. I mean, markets move around all the time, right, so isn’t there always money to be made? Well, yes, but sometimes a market sets up and is poised for a move, it’s just not possible to predict in which direction. That is the case right now with natural gas.

(Click to enlarge)

Natural gas futures have now spent nearly three weeks trading in a range of $2-$2.20. There has been some good intraday volatility during that period for sure, but for those focused on swing trading rather than day trading it has been frustrating to see no follow through.

What is happening here seems to be essentially a battle between the past and the future. The recent past of natural gas in the U.S. has been well documented. The shale boom may have led to some oversupply in oil but it is nothing compared to what it did to natural gas. Production has increased dramatically over the last five years or so as the gas from the new wells has come on line and demand had no hope of keeping up. As a result prices collapsed from around $6.50 to under $2

(Click to enlarge)

The future, however, suggests that there may be some relief coming. As with oil the old adage of low prices being the cure for low prices has taken…

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