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Has Natural Gas Finally Bottomed Out?

A few weeks ago, I had a go at catching the falling knife that is natural gas right now. For all of two trading days it looked like that might have been a good call as natty popped around 10%, but then it quickly resumed its drop…

As I have said here many times before, though, my contrarian trading style means that there is always a danger of something like that, so I set up trades to allow for it. In this case, I moved my initial stop up a bit on that two-day jump, so while I did lose money, it was a relatively small amount. That is why, on moves like this, I am not afraid to jump back in when the time seems right. “Once bitten, twice shy” is not a phrase I live by in these situations. Rather, it is “If at first you don’t succeed…”.

The point is, if I have landed on a contrarian position during a big move, there is always a reason. It isn’t just “what goes up must come down” or the opposite for a bearish move. It is either that the fundamental conditions that forced the move have changed or are about to, and/or the price has moved well beyond the point where they are priced in. That doesn’t mean that a reversal will happen immediately, of course. As traders are so fond of saying, the market can stay illogical a lot longer than you can stay solvent.

If that hasn’t changed, and it hasn’t with natty’s drop, it becomes not a matter of if I try again despite losing once,…

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