Replies to post #654 on ETFs, Leveraged ETFs, Sector Funds

[stiv]

Nice update this morning

I'm starting to feel the same

6:00 AM EDT, Wednesday, April 17, 2019


Natural gas continued its slow-motion sell-off on Tuesday, falling another 2 cents or 0.7% to settle at $2.57/MMBTU. With the storage deficit versus the 5-year average falling under -400 BCF yesterday, the year-over-year storage deficit flipping to a surplus overnight, and a prolonged period of generally seasonal temperatures expected for the next several weeks, there is no obvious catalyst besides oversold dip buying to support a sustainable rally right now.Yes, LNG feedgas demand has rebounded sharply over the past 5 days. However, it remains nearly 1 BCF/day below the recent highs and is barely keeping pace with recent production growth.

At this time, I remain bearish on the sector and see few near-term positives in the sector. However, at $2.62/MMBTU, the June 2019 contract held by the 3x natural gas ETFs UGAZ and DGAZ is nearing my downside price target of $2.60/MMBTU. Below this level, I feel that, even with the bearish conditions, upside potential begins to outweigh downside risk. The path downwards will meet increasing resistance with further downside requiring a continuance of nearly ideal bearish conditions and/or production growth while relief rallies will be triggered by much smaller events such as a heating trend in the models or a better-than-expected EIA storage report.

For this reason, I am coming close to taking profits on my natural gas short trade and will even consider flipping back to long, accepting that I may be a bit too early on the trade with further downside to $2.50/MMBTU still not out of the question.