Velocityshares 3X Inverse Natural Gas Etn (DGAZ)

[surehands]

https://seekingalpha.com/article/4073872-natural-gas-trading-risk-short-term-vs-long-term

Summary

There are good reasons to be both bullish and bearish on natural gas.

Trading risks are different for different time frames.

Know your psychology and trade accordingly.

On Sunday afternoon, we have downgraded our short-term trading risk indicator from mildly bearish to moderately bearish. At the same time, we had no choice but to keep our long-term trading risk indicator at moderately bullish. We kept both indicators unchanged this morning. What does it mean? And, what should a trader do?

Natural Gas Trading Risk

Source: GeckoiCapital website

Short Term

The overall technical picture in natural gas is always deceptive. Indicators describe the past and never predict the future. For example, on Monday morning, natural gas broke above its short-term pivot level at 3.402 and was trading above its long-term pivot level at 3.232 as well as above all major daily moving averages. Everything looked exceptionally bullish. Even daily RSI was not yet technically in the overbought territory (i.e., above 70 mark). So, why did we downgrade our short-term trading risk indicator to moderately bearish? There were several reasons, and extreme market sentiment was only one among them.

First of all, changes in the near-term consumption forecast were bearish. Our two-month national consumption forecast was down 22 bcf from Friday results and has actually hit a new low this morning (see Evolution of National Consumption in the chart pack below). Second, near-term storage outlook was revised higher, while power burn has stabilized (see Power Burn in the chart pack below). Third, market sentiment was nearing extremes on both sides: retail traders were exceptionally short, while professional traders were exceptionally long (see Commitments of Traders and Retail Sentiment in the chart pack below).