October 2010
Beginner to intermediate
192 pages
9h 23m
English
Content preview from Commodity Trader's Almanac 2O11
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32
NATURAL GAS SURGES
Our long natural gas trade from late February to
late April boasts a 75.0% success rate, gaining 15
out of the last 20 years. One of the factors for this
seasonal price gain is consumption driven by
demand for heating homes and businesses in the
northern cold weather areas in the United States.
In particular, when December and January are
colder than normal, we see depletions in inventories
through February. This has a tendency to cause price
spikes lasting through mid-April.
This best trade scenario has a holding period
of approximately 41 trading days lasting until on or
about April 21. It is at this time that inventories
start to replenish and demand tapers off until
mid-July, when demand for generating electricity
is highest in order to run air conditioners during
heat spells.
The chart below is natural gas (NG) with the
United States Natural Gas (UNG) ETF overlaid,
displaying the strong correlation in price moves.
In addition, the bottom line shows the average
seasonal price tendency since 1990, illustrating
the bottom that occurs in February. See pages
133–138 for additional correlated trades.
The natural gas bear market since the summer
of 2008 caused by a glut in the United States due to increased supplies and decreased
demand made by ideal weather conditions and recent dollar strength has put a damper on
this trade the last two years. Using risk management techniques, such ...
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