Natural Gas has receded out of popular market consciousness.
Gas has suffered a Major correction: depth and duration.
6 months. 108 days down 63%. Gas bulls have become rare.
Sentiment is far too negative.
Fear apathy and despair have grown universal in gas. When blood in the streets prevailing prices are combined with strong technical and fundamental cases why gas is due to rally, it creates an opportunity.
In each of the last few years Gas has spiked in late summer, or early Autumn.
Supply scares driven by last years hurricanes caused a 200 dma surge that creates problems for relativity analysis. Gas has started to show some resilience not too far under where its original pre-parabola 200 dma would have trended if euphoria hadn’t set in.
Gas first hit its 200 dma on the way down, but ultimately hit $6.
Natural Gas at $6.10 these prices are oversold and do not reflect the current gas fundamentals. Dept of Energy’s Energy Information Administration (EIA) expecting average gas prices of $7.74 in 2006. So far average is $7.13. So for rest of year prices need to rise to $8.35 or higher for the rest of the year…45% above recent lows.
EIA is officially predicting that Gas prices will rise above $10 by December, January. Interesting $10 is conservative Technically as well…will be within gas’s secular up trend channel.
January was very warm in the US…caused gas to be weak in 2006. Levels of gas in storage now are higher that average…27% higher than last year and 46% over their 5 year average.
EIA factors this into their projections and also a moderate summer rather than a warmer one.
Even if the Gulf does not get threatened by a Hurricane this year, I think Gas looks good right now.
