Author Topic: Natural Gas Futures Crash 10%. Weather Trading Over Winter, A Cautionary Tale  (Read 945 times)

KnovaWave

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What a difference a weekend makes. Natural Gas finished 2016 as the best performing commodity, then on the first trading day of 2017 the prompt futures contract lost 10.53% 0.392 to close at 3.332 USD MMBtu. Technically the direction was no surprise, however the veracity was. The Knovawave model had moved short per the trend line tap and Murrey math Signal. The monthly Chikou had also warned of the resistance overhead.

The COT report showed the punters were in huge amounts and the failure to go ahead after last weeks EIA report gave seasoned traders a heads up. The response of Vol where G was barely up and H actually down showed us how so many were positioned. Today's action should be taken as a cautionary tale for traders trading natural gas over winter, or indeed over any purely speculative action as the weather. Take that in for a moment, you are punting on the weather. The weather experts got it wrong and how rare is that? Technical analysis should be used to determine risks and probability, this natural gas sell off is perhaps a poster child for that.
 

Have a plan.

Natural gas futures down 40 cents today. The set up was failure off the upper trend. It gapped lower and slid through 50% Fib hard when it gaps down 20 cents



Natural gas 4 hour study shows the damage opening at the top of cloud and going, recall 240 Murrey Math had you short off the channel.



COT Warning Shot

HEDGE FUNDS raised combined net long position in NYMEX+ICE US natgas by +78 bcf to 2,927 bcf in wk to Dec 27 (longs +44 bcf, shorts -33 bcf) via @JKempEnergy



Cloud Chartist

This is a good example of price getting rejected when chikou came into a candle on NG Monthly via @CloudChartist



From here use your Murrey Math Grid, your Fibonacci and Ichimoku confluence and be well aware of the daily weekly and monthly Ichimoku levels within your wave count.



NG Weekly : tenkan sen support at 3.224 ‏via @CloudChartist

Trade Smart

KnovaWave
KnovaWave

KnovaWave

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Today's spike low at 3.1720 base was a spit of the 61.8% and into the daily cloud - that becomes significant now - solid bounce to 3.26 here
KnovaWave

TradersCom

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A violent few sessions back and forth 12 cents

From Bloomberg:

U.S. Gas Bulls Stick to Their Bets With Supply Deficit to Grow By Naureen S. Malik (Bloomberg)

U.S. natural gas bulls say the worst start to a year since 2006 won’t last given a supply deficit that looks set to widen. Seven of nine analysts and traders surveyed by Bloomberg expect prices to rebound after prices plunged this week as a result of an abrupt change in weather forecasts. A cold snap sweeping the lower 48 states will give way to above-normal readings from Jan. 10 through Jan. 19., according to MDA Weather Services.

With production down and exports on the rise, demand for the heating fuel will likely pick up from next month in comparison with unusually mild conditions a year ago. Another cold snap would further dent stockpiles, a dramatic turnaround from last winter when a massive supply surplus sent prices to a 17-year low in March.  “We’ve gone too far,” said Teri Viswanath, managing director for natural gas at PIRA Energy Group in New York. “

We’ve already factored in a lot of the warmth for January and when you start to look at the comparison for February and March, it starts to look more constructive.” The gas market probably lost about 2.5 billion cubic feet a day of demand with the change in the January weather forecast, she said. In the next two months, demand growth may be 6 billion cubic feet a day above year-earlier levels, she said.

Gas futures slumped 12 percent so far this week to $3.273 per million British thermal units on the New York Mercantile Exchange. That’s the steepest loss for the start of any year going back to 2006.
Markets Claws of Chaos

TradersCom

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Natgas has been violent off these levels this chart from Commodity Analytics @otcengine is very informative:

Risk Reshaping in #natgas options. Here is recent Summer atm vol and skew. Last cpl days put skew ⬇️ call skew ⬆️ and vol

Markets Claws of Chaos

 


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