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NATURAL GAS LOOKING TO PLAY "CATCH-UP"

Richard Rhodes

Richard Rhodes


In the past 10-months, the commodity markets have rallied rather substantially on the back of the QE-2 campaign. But, we would be remiss if we didn't point out that Natural Gas did not participate, with prices below the August levels extant when Fed Chairman Bernanke announced that QE-2 was a probable event. However, recent price gains in "natty" have given us reason to believe that it shall play "catch-up" in the weeks and months ahead, with money coming out of higher priced commodities and going into this laggard.

Nat gas 6-3-11

Technically speaking, the inverse "head & shoulders" bottom was confirmed last week with a close above neckline resistance. This level has proven its merit in recent weeks, thus the breakout is considered material. This, when considering the high probability of a 120-week exponential moving average breakout - all argue for sharply higher prices towards the $7 to $8 range from a current $4.74...or a gain between +48% to 70%.

Therefore, one can either use the Natural Gas futures or the Natural Gas ETF (UNG) to participate in the rally. Our choice at present is UNG.