Monday, August 31, 2009

UNG Just Get's More and More Interesting

I have received some "entertaining" emails and comments from fellow traders about the fact that even with all of the negative and controversial news surrounding UNG I do maintain a small swing position in UNG. After 20 years of this I have just developed a habit for making sure I am in the most "news worthy" trades, some how, good or bad.

I just found this in my in box from Phil's Stock World.....

Shares of the natural gas exchange traded fund have slipped 4.4% lower today to reach a 5 year low of $10.64. Despite the present weakness in UNG, one investor was seen making far term bullish bets on the fund by targeting the April 2010 contract. It appears that the trader established a bullish reversal play by shedding 3,000 puts at the April 10 strike for 1.85 apiece in order to purchase 3,000 calls at the higher April 11 strike for 1.82 each. The trader receives a net credit of 3 pennies per contract and has positioned himself to add to his gains if shares rally higher than $11.00 by expiration. The short put position indicates that the investor is happy to have shares put to him at an effective price of $8.15 in the event that the put options land in the money by expiration. Shares need only remain higher than $10.00 for this individual to retain the 3 cent credit indefinitely.

This will be an amazing trade, for someone, somehow, someway.

Crude Oil Falls the Most in a Month as Global Equities Slump


Crude oil prices fell the most in a month as Chinese equities led a global slump on concern a slowdown in lending may derail an economic recovery in the world’s second largest energy consuming country. Oil futures declined for the first time in three days after the Shanghai Composite Index, China’s benchmark, tumbled 6.7 percent on a report that the nation’s banks cut lending. U.S., Asian and European stocks followed the Chinese market lower. “All of what we are seeing today can be blamed on the Chinese stock-market selloff,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “The Chinese markets have helped support commodities. Price rises have been based on expectations of increased economic growth and demand in China”.....Read Complete Article

Sunday, August 30, 2009

Oil Drops as Stockpile Concerns Cap Gains on Economic Optimism


Crude oil fell for the first day in three in New York as concern over above-average distillate fuel stockpiles capped a rally built on speculation that demand will increase as the global economy recovers. U.S. distillate inventories, which include diesel and heating oil, rose to a four week high of 162.4 million barrels last week, the Energy Department said Aug. 26. That’s near the highest level since 1983. Separately, the United Arab Emirates’ state owned company eased cuts on crude oil supply for the first time in seven months, a sign OPEC members may be overshooting their output targets. “As we get into the autumn season we’ll focus on distillate fuels and right now inventories are at very high levels and then we have the floating storage off Europe”.....Complete article

Crude Oil Will Be Bounded Between 65-75 In Coming Months


Early last week, worries on credit tightening by the Chinese Government triggered selloffs in risky assets. In the commodity universe, the base metal complex got the biggest hit as the government's massive stimulus plan has encouraged expansion in various industries. Should the government tighten lending, many projects may have to be postponed or cancelled.However, later in the week, strong macro economic data boosted sentiment again and improved market sentiment helped commodities pared some of the losses made earlier. However, the Jefferies/Reuters CRB Index still lost -0.6% over the week. Crude oil price rose for the second consecutive day last Friday as encouraging economic data.....Read Complete Article

Saturday, August 29, 2009

PetroChina Profit Tops Analyst Estimates, Acquisitions Planned


PetroChina Co., the world’s most valuable company, posted profit that beat analysts’ estimates on record earnings from oil refining after the government raised fuel prices and China’s economic recovery spurred demand. Second quarter net income rose 26 percent to 31.5 billion yuan ($4.6 billion), derived by subtracting earnings for January to March from first half figures announced in Hong Kong yesterday. The Beijing based oil producer and refiner joins China Petroleum & Chemical Corp., known as Sinopec, in reporting higher profit. The gains contrast with earnings declines at Exxon Mobil Corp. and Royal Dutch Shell Plc after the global recession cut U.S. and European consumption. PetroChina, Sinopec and Cnooc Ltd., the nation’s biggest oil companies, this week pledged.....Complete Article

Friday, August 28, 2009

Is it Time to Buy Natural Gas? Let's Look at the Current Trend Chart

Smart Scan Chart Analysis for UNG confirms that a strong downtrend in natural gas is in place and that the market remains negative longer term. Trade this strong Downtrend with tight money management stops. A "Trade Triangle" indicates the presence of a very strong trend that is being driven by strong forces and insiders. As we can see the answer is obvious.

Based on a pre-defined weighted trend formula for chart analysis, UNG scored -100 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10......Last Hour Close Below 5 hour Moving Average
-15......New 3 Day Low on Friday
-20......Last Price Below 20 Day Moving Average
-25......New 3 Week Low, Week Ending August 22nd
-30......New 3 Month Low in August
-100.....Total Score



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Thursday, August 27, 2009

Industry Worries Rise As Natural Gas Sags


Despite recent cutbacks in production, natural gas prices are at a seven year low and the U.S. still faces surpluses, fueling concern the industry has yet to hit bottom. At the same time, oil and gas producers are beginning to see operational costs creep up again after pushing suppliers to lower prices for products and services in recent months, putting further pressure on margins, an industry analyst said Wednesday at the NAPE summer conference in Houston. "This is a problem for all of us at the moment," Bob Fryklund, vice president of IHS Cambridge Energy Research Associates, told a ballroom of oil and gas professionals during a panel discussion at the conference, formerly known as the North American Prospect Expo.....Complete Story

Natural Gas ETF Implosion


Natural gas seems to have fallen out of favor in 2009. Over the past year the spot price of natural gas has fallen from a high of $14 to below $3. The primary reasons for the free fall in price is the sizable natural gas inventories around the world combined with a relatively stubborn natural gas industry which refuses to slow production in the wake of a global recession and economic slowdown.

As the bifurcation between oil and natural gas began to play out this year, many looked at the widening gap in the oil to natural gas price ratio as an opportunity to long natural gas, which they thought was merely lagging the recovery in oil prices by a few weeks.....Read The Complete Article

UNG, USO Trading Alerts Newsletter From The Gold and Oil Guy

UNG Natural Gas Trading Fund – Daily Chart
Nat gas looks to be finding support at the $11.50 level. This could provide a great short term trade for those active traders looking to grab a quick 5-10% gain if the price starts to rally intraday. Overall natural gas has been trading down and sideways.




USO Crude Oil Trading Fund - Weekly Chart

Crude oil has a very nice looking chart. The bullish pennant is pointing to a much higher price. Currently the price is stuck under the June resistance level but appears to be holding up nicely. Any week now I expect to see a sharp rally or a sharp sell off. Let’s continue to watch the price unfold.



Technical Traders Conclusion:

The analysis above allows you to see that crude oil is trading in a bullish pennant. I am watching the daily charts very closely for a buy signal. Waiting for my low risk buy signal is important because it confirms momentum and bullish price action before we put our money to work. This commodity could easily roll over and sell down quickly which is why I always follow my trading strategy to help avoid getting caught on the wrong side of the trade.

Natural gas is currently over sold in my opinion and ready for a bounce. If the price starts to move higher tomorrow (above Wednesdays high) then you could go long for a 1-5 day trade. There is a good chance it will provide 5-10% return, but be sure to take profits quickly as it is just a bounce (dead cat bounce). If the price drops below Wednesdays low then I would not be holding it any longer.

If you would like to receive my Free Weekly Trading Reports or my Real-Time Trading Signals for ETF’s and Stocks please visit my websites at Gold and Oil Guy or Active Trading Partner

Oil Declines Below $70 on Signs Demand Will Be Slow to Recover


Crude oil fell below $70 a barrel in New York on signs that demand will be slow to rebound after a report yesterday showed that inventories unexpectedly rose last week in the U.S., the world’s largest energy consuming country. Oil prices dropped as much as 2.2 percent to their lowest level in a week after the Energy Department said crude stockpiles rose 128,000 barrels last week, compared with forecasts for a 1.15 million barrel reduction. U.S. jobless claims increased more than estimated. They peaked in April in the midst of the worst recession since the Great Depression. “We’re not seeing anything to suggest demand is recovering, so there’s nothing on the fundamental side that would suggest prices would be this high,” said Bill O’Grady, chief market strategist.....Complete Story

Wednesday, August 26, 2009

Commodities Move Sideways But With A Mildly Bullish Tone


Crude oil recovers modestly in European morning. Rise in Asian stock markets and strong sentiment index in Germany boost price. Currently trading at 72.2, the benchmark contract will continue its narrow trading ahead of oil inventory report.
Germany's IFO business climate index rose to 90.5 in August, compared with market expectation of 89.1, from 87.3 in the prior month. Leading the surprisingly strong number was a +4.6 point increase in the 'expectations' component. The 'current conditions' component also gained +1.8 points during the month. In Asia, stocks advanced as several Chinese companies' reported better than expected earnings results. The MSCI Asia Pacific Index surged.....Complete Story

Crude Oil Falls as Dollar Strengthens on Chinese Demand Concern


Crude oil fell for a second day as the dollar strengthened, undermining demand for assets used to hedge against inflation. Oil dropped as much as 1.9 percent as the dollar advanced on a report by the Xinhua News Agency that China is studying curbs on industrial overcapacity, increasing concern the global economic recovery will slow. Oil also declined after an unexpected gain in crude inventories. “The fact that we are getting some strength in the dollar is certainly a contributing factor to the recent weakness we are seeing in oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “There’s still a lot of supply in this market and not a lot of demand”.....Complete Story

Peak Oil? Crude Oil Supply Data Doesn't Lie


After the epic crash last year, the price of oil is stabilizing and it should rise exponentially over the following years. Over the past year, global consumption has stayed weak, however once the economy recovers, crude oil should resume its secular bull market. Despite the 'demand destruction' hype, it is interesting to note that during this severe global recession, worldwide oil usage has dropped by a minuscule 2.7%. So, what will happen when the world comes out of this recession? Who will rise up to the challenge and meet our insatiable thirst for energy? These are critical questions not many are willing to ask. According to the US Department of Energy, liquid fuel demand in the developed nations peaked in August 2005 at 41.89 million barrels per day..... Complete Story

Oil Falls a Second Day After Report Shows U.S. Supplies Rose


Crude oil fell for a second day after an industry report showed that inventories rose last week. Oil dropped as much as 1.7 percent after the American Petroleum Institute reported yesterday that oil supplies climbed 1.3 percent, the most since April, to 346.7 million barrels. The Energy Department will say in a report today that stockpiles fell 1.15 million barrels last week, according to a Bloomberg survey of analysts.“If we’re seeing actual builds in inventories, especially crude inventories, that might imply we’re seeing a bit of a rush to the market with new supply coming in,” said Brad Samples, a commodity analyst for Summit Energy Inc., an energy management company in Louisville, Kentucky.....Complete Story

Imagine Not Having Access to Any Financial News

Imagine not having access to any financial news stories. The only information you have about the market is the market itself.

Would you be a better trader or a less successful trader?

I think you would be a better trader. I have often said that the market is the best news provider in the world. It’s up to the minute and it reflects both domestic and international issues. The success of our “Trade Triangle” technology is based upon market action.

In our new short video, we’ll take a big look at the S&P 500 market and where we expect it will head in the months to come.

We all need to be prepared for what lies ahead, and this video is worth watching for that very reason.

Tuesday, August 25, 2009

Oil Post Key Reversal Day, Lower Prices Possible Near Term


Crude oil posted a key reversal down on Tuesday and closed below the 20 day moving average crossing at 71.85 confirming that a double top with June's high as been posted. Stochastics and the RSI are diverging and are turning neutral signaling that sideways to lower prices are possible near term. The low range close sets the stage for a steady to lower opening on Wednesday.

Closes below last Monday's low crossing at 67.42 would confirm that a short term top has been posted. If October extends this month's rally, June's high crossing at 75.27 is the next upside target.

First resistance is today's high crossing at 75.00
Second resistance is June's high crossing at 75.27

First support is today's low crossing at 71.11
Second support is last Monday's low crossing at 67.42

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The U.S. Dollar closed slightly lower on Tuesday as it consolidates below the 20 day moving average crossing at 78.62. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If September renews last week's decline, the reaction low crossing at 77.52 is the next downside target. Closes above last Monday's high crossing at 79.36 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 78.66
Second resistance is last Monday's high crossing at 79.69

First support is last Friday's low crossing at 77.81
Second resistance is the reaction low crossing at 77.52

Dennis Gartman’s 22 Rules of Trading

Natural gas closed lower on Tuesday. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are oversold but are neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 3.429 would confirm that a short term low has been posted.

If September extends this month's decline, monthly support crossing at 2.640 is the next downside target.

First resistance is the 10 day moving average crossing at 3.10
Second resistance is broken support crossing at 3.37

First support is Monday's low crossing at 2.73
Second support is monthly support crossing at 2.64

Bloomberg Technical Analysis: Oil Risks Drop to $71.50 If Rally Stalls


Crude oil risks falling toward $71.50 a barrel if prices are unable to surpass a “strengthening level” near $75 in the coming days, according to Societe Generale. Oil has the potential to rise as high as $78 a barrel only if it can push past a $74.65 to $75.25 band, said Stephanie Aymes, a London based commodity technical analyst for the bank. A failure to break this resistance may trigger the unwinding of gains made over the past week. Prices will “further rise but mind $74.65/$75.25,” she said in a report yesterday. “Under $71.50 the correction resumes.” Oil climbed to a 10 month high above $74 a barrel yesterday on speculation the global economy is recovering from recession.....Complete Story

Crude Oil Lower on Overnight Profit Taking


Crude oil was lower overnight due to profit taking as it consolidates some of last week's rally. Stochastics and the RSI are diverging but remain bullish signaling that sideways to higher prices are possible near term.

If October extends last week's rally, June's high crossing at 75.27 is the next upside target. Closes below last Monday's low crossing at 67.42 would confirm that a top has been posted.

Tuesday's pivot point, our line in the sand is 74.13. The weekly pivot point is 71.85.

First resistance is Monday's high crossing at 74.81
Second resistance is June's high crossing at 75.27

First support is the 10 day moving average crossing at 72.29
Second support is the 20 day moving average crossing at 71.96

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The U.S. Dollar was steady to slightly lower overnight. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If September extends last week's decline, the reaction low crossing at 77.52 is the next downside target. Closes below the reaction low crossing at 77.52 would renew this summer's decline.

First resistance is the 10 day moving average crossing at 78.66
Second resistance is last Monday's high crossing at 79.69

First support is last Friday's low crossing at 77.81
Second support is this month's low crossing at 77.52

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Natural gas was steady to lower overnight as it consolidates some of Monday's short covering rally. Stochastics and the RSI are oversold and are turning bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 3.432 are needed to confirm that a short term low has been posted.

If September extends this month's decline, weekly support crossing at 2.640 is the next downside target.

Natural gas daily pivot point for Tuesday is 2.88, the weekly is 2.95

First resistance is the 10 day moving average crossing at 3.10
Second resistance is broken trading range support crossing at 3.37

First support is Monday's low crossing at 2.73
Second support is weekly support crossing at 2.64

Monday, August 24, 2009

Oil Drops From 10 Month High as Stocks Fall, Dollar Strengthens


Crude oil dropped from a 10 month high as concerns that China may tighten lending and more U.S. loans may default pushed equities lower and strengthened the dollar, reducing the investment appeal of commodities. Oil declined as investors sought so called safe haven assets such as the dollar over commodities. Oil also fell in tandem with equities on concern that the Chinese government would curb new loans and SunTrust Banks Inc. said that U.S. lenders face more credit losses and commercial real estate may falter through 2010. “Equity and oil markets have been very closely correlated in the last six months,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne.....Complete Story

Transocean Maintains Strength In Numbers


The world's largest offshore drilling contractor with 141 jackups, semisubmersibles and drillships, Transocean has been able to maintain its strength through offshore innovation and acquisitions. Merging with Global Santa Fe in 2007 to cement its place as the world's largest offshore drilling fleet, Transocean has consistently set its sights on pushing the boundaries of technology. In fact, Transocean owned and operated the world's first ever jackup rig in 1954. Through the decades, the company has continued to achieve a number of industry firsts, and that spirit of innovation has helped to turn Transocean into an industry leader.....Complete Story

U.K. Gas Plunges on Excess LNG, Supplies From North Sea, Norway


U.K. natural gas contracts plunged amid lower than normal demand and excess flows of liquefied gas and fuel from the North Sea and Norway. Wholesale gas for same day delivery dropped as much as 13 pence, or 59 percent, to 9 pence a therm, according to broker ICAP Plc. That’s the lowest since October 2006 and equal to $1.49 a million British thermal units. A therm is 100,000 Btus. It was at 15 pence at 4:40 p.m. in London. Gas for the rest of the working week fell 6 pence to 17 pence a therm. U.K. gas demand in the 24 hours through 6 a.m. tomorrow is forecast at 173 million cubic meters, according to National Grid Plc data. That’s 9 million less than the last working day of last week and 37 million below normal for this time of year as the recession and unseasonably warm weather cut demand.....Complete Story

Sunday, August 23, 2009

The Energy Report with Chris Vermeulen

The Energy sector seems to be a mixed bag. The weakness of the US dollar has help to boost the price of oil. Currently crude oil is threatening to break above the June high which will most likely trigger a surge of speculate traders/investors for buy crude oil. If the US dollar does find support in the coming weeks we should see the price of oil slide back down to the $60 per barrel level.

Natural gas as most of you know from my weekly writings is not something I am drooling over yet. It was every exciting two months ago with the bullish breakout but we avoided getting caught in the whipsaw action because of my low risk entry rules which confirm short term strength before we put our money to work.

Below is a 4 month chart of the Crude Oil price
This chart clearly shows momentum is up and the price of oil trying to move higher as it trades at resistance of the June high. We are close to a possible low risk buy signal but depending on the price action this week will dictate what happens.



Below is a 4 month chart of the Natural Gas price
Natural gas I will say has on ugly looking chart. The only observation I can really get out of this is that gas is trading at the bottom of its trading range which is $3.30 area, and the top of the range is $4.20. This is a 27% trading range and could be a great small spec trade at this price level. This type of trade is for a high risk taking trader. I would like to see the price move sideways 1-2 more days here so I know its not making another leg lower from here.



Energy Trading Conclusion:
There are several things which could happen here for oil and gas but in short my thought is if the US dollar continues to slide lower we will sell oil continue to rise and this will help boost natural gas prices some what. Because Natural Gas is at the low of its trading range there is a better chance we will see a higher price in the coming days for a small bounce. Natural gas has been underperforming the price of crude oil for 8 months which has happened in 2006 as well.

I continue to sit on the sidelines and watch the market unfold. Waiting is not the most fun but it is much better to wait than lose money on a bunch of high risk trades repeatedly.

Crude oil could have a low risk setup this week if all things work out. I am neutral on natural gas and not willing to jump on that rollercoaster.

If you would like to receive my Free Weekly Trading Reports or my Real Time Trading Signals for ETF’s and Stocks please visit my websites at Gold And Oil Guy or Active Trading Partner

To Your Financial Success,
Chris Vermeulen
The Gold and Oil Guy

Sinopec’s Net Surges on Fuel Prices; Beats Estimates


China Petroleum & Chemical Corp., Asia’s biggest refiner, said first-half profit rose more than four fold, beating estimates, after the government eased curbs on fuel prices and the nation’s economic recovery spurred demand. Net income increased to 33.2 billion yuan ($4.86 billion), or 0.381 yuan a share, from a restated 7.7 billion yuan, or 0.057 yuan a share, a year earlier, Sinopec, as China Petroleum is known, said in a statement to the Hong Kong stock exchange today. That compares with a 27 billion yuan median estimate in a Bloomberg survey of four analysts. The gain contrasts with earnings declines at Royal Dutch Shell Plc and Exxon Mobil Corp., the world’s biggest oil companies, after.....Complete Story

Saturday, August 22, 2009

Oil Price Made New Year-High But Be Cautious When Interpreting Inventory Data


Early last week, the commodity market extended weakness in the previous week as risk sentiment turned more cautious on decline in stock markets (particularly sharp fall in stock markets in China) and strength in USD. However, since the middle of the week, impressive crude inventory draw, rebounds in equity markets and better-than-expected economic data revived investors' confidence. The Reuters/ Jefferies CRB Index added +0.5% on weekly basis. WTI crude oil price for October made a new year-high at 74.72 Friday after strong US housing data. The benchmark contract finished the day +1.3% higher to 73.89, the highest closing price since October 2008.....Complete Article

Friday, August 21, 2009

Possible New US Rules Are Wildcard for Commodity ETFs


Investors who want to buy a commodity exchange-traded fund need to perform a new type of calculus....Guessing which ones will be affected by possible new limits on speculators. Worries about regulators possibly curbing ETFs that hold commodity futures have been around since crude oil prices spiked last summer. But in the past few weeks, the threat has become much more real, hindering operations of funds that target commodities ranging from natural gas to wheat. Investors now face a guessing game about whether anticipated restrictions will affect still more funds.....Complete Story

More Regulation for Energy Futures?

Bank of America-Merrill Lynch Vice Chair Tom Petrie on U.S. and U.K. regulator's plans for regulation of energy futures markets.



Crude Oil Must Clear $73 or Face 25% Drop


Crude oil risks a decline of as much as 25 percent in the coming weeks if the market’s bulls are unable to break chart resistance above $73 a barrel after repeated attempts, according to Cameron Hanover Inc. Oil settled above $72 a barrel in the past two days, the closest test of its technical upside this month, and will sustain a rally only if prices rise above the June 30 peak, also the highest this year, said Peter Beutel, president of the New Canaan, Connecticut based trading adviser. The gains of about 25 percent made since the mid July drop to below $59 may unravel because of a failure to break resistance. "Crude needs to settle over $73.38 to initiate a new leg higher," Beutel said in an e-mail. "If we fail, we should drop all the way back to $58.20 to $59.25".....Complete Story

Oil Climbs to New 2009 High


Oil prices jumped Friday to a new high for the year after Federal Reserve Chairman Ben Bernanke said that the U.S. economy is nearing a recovery and other economic data backed him up. Benchmark crude for October delivery surged $1.81 to $74.72 after Bernanke spoke at an annual Fed conference in Jackson Hole, Wyo. By midday, oil was trading at $73.91, topping the previous annual high of $73.23 set on June 11. Oil started climbing early in the morning after financial information company Markit said its composite purchasing managers' index showed the European economy was stabilizing.....Complete Story

China's Importance Has Been Reflected Not Only In Base Metals, But Also In Energies


Crude oil price for October delivery tries to recapture the 73 level after pulling back to around 72 earlier today. While the market remains thrilled by oil's +8% rally in the previous 2 days after huge decline in crude stockpiles, we advise a closer look at the selloff earlier in the week. It indicated that China's impact is not only on industrial metals, but also on energy market. More importantly, the impact is growing bigger and bigger. According to the National Bureau of Statistics in China, crude oil production was 109.6M metric tons from January to July 2009, down -0.9% from the same period last year.....Complete Story

New Video: Candlestick Formations You Need to Learn


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In many of our previous videos we’ve looked at charts using Japanese candlestick charts. While this is interesting, we’ve never quite explained to you some of the powers behind using Japanese candlestick charts.

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Thursday, August 20, 2009

Natural Gas Dives Below $3, 1st Time Since 2002, on Supply Glut


Natural gas futures fell below $3 per million British thermal units for the first time in more than seven years after a government report showed rising supplies of the industrial and power plant fuel. U.S. inventories of the fuel rose 52 billion cubic feet to 3.204 trillion in the week ended Aug. 14, the Energy Department said today in a weekly report. Supplies were 19 percent higher than the five year average. "We have such a storage overhang staring you in the face," said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. "There won’t be any sustainable upward momentum until you work through this storage problem".....Complete Story

Is it Time To Buy Natural Gas? Let's Look at The Charts

In all of my years of trading I have never seen so much attention given to natural gas, especially by retail traders. Investors have been piling into long positions as they see nat gas having no where to go but up. In my opinion that is just trading with emotion. What is the trend in natural gas? Let's take a look at at a trend analysis of UNG, the most common ticker for natural gas.

Smart Scan Chart Analysis confirms that a strong downtrend is in place and that the market remains negative longer term. Trade this trong downtrend with money management stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders. Based on a pre-defined weighted trend formula for chart analysis, UNG scored -100 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10......Last Hour Close Below 5 hour Moving Average
-15......New 3 Day Low on Wednesday
-20......Last Price Below 20 Day Moving Average
-25......New 3 Week Low, Week Ending August 22nd
-30......New 3 Month Low in July
-100.....Total Score


As you can see natural gas gets the worse grade possible. The pivot point for natural gas today is 3.12 and I have been calling for a target of 2.90. I know some pretty smart traders that have a 2.00 target on nat gas in the future. You say impossible? This reminds me of the days when sugar prices went into the pennies, and traders were drawn in all the way down. Remember the cliche, the trend is your friend. It holds true more today then ever.

To receive these daily trend analysis in your in box just create a FREE portfolio and sign up for a FREE trend analysis on your favorite tickers.

Crude Oil Rally Under Pressure From Jobless Claims


Crude oil was lower due to profit taking overnight as it consolidates some of this week's rally. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. The bullish case is under pressure this morning by worse then expected jobless claims this morning, creating demand concerns among traders.

If September extends this week's rally, the reaction high crossing at 72.84, then June's high crossing at 74.66 are the next upside targets. Closes below Monday's low crossing at 65.23 would confirm that a top has been posted.

Thursday's pivot point, our line in the sand is 72.53

First resistance is Wednesday's high crossing at 72.80
Second resistance is this month's high crossing at 72.84

First support is the 10 day moving average crossing at 69.97
Second support is the 20 day moving average crossing at 69.50

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The U.S. Dollar was higher overnight as it consolidates some of Wednesday's decline. However, stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. Closes below last Friday's low crossing at 78.30 would temper the near term friendly outlook.

Closes below the reaction low crossing at 77.52 would renew this summer's decline. Closes above the reaction high crossing at 79.81 are needed to confirm that a short term low has been posted and would open the door for a larger degree rebound during August.

First resistance is the reaction high crossing at 79.81
Second resistance is July's high crossing at 81.16

First support is last Friday's low crossing at 78.30
Second support is this month's low crossing at 77.52

Today’s Stock Market Club Trading Triangles

Natural gas was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If September extends this month's decline, weekly support crossing at 2.640 is the next downside target. Closes above the 20 day moving average crossing at 3.575 would confirm that a short term low has been posted.

Natural gas pivot point for Thursday is 3.12

First resistance is the 10 day moving average crossing at 3.34
Second resistance is broken trading range support crossing at 3.37

First support is Wednesday's low crossing at 3.05
Second support is weekly support crossing at 2.64

Wednesday, August 19, 2009

Why Oil Won't Return to Triple Digits


Oil prices have surged more than 50% from the start of the year, but don't expect a return to triple digits anytime soon, worries about the pace of an economic recovery will continue to drive near term volatility. "The market is manic right now," said Phil Flynn, analyst at PFG Best. "This is more uncertainty than I've seen in a very long time: big rallies followed by big breaks, and that's reflective of feelings about the overall economy." Concerns about the recession and more recently the timing of recovery have translated into some big swings. Worldwide consumption faltered as the global recession took hold, sending prices lower. There have been signs of a recovery, but it won't be a straight line.....Complete Story

Energy Takeovers to Accelerate as Value Gap Narrows, UBS Says


Acquisitions of energy producers will accelerate late this year and early next year as suitors and cash strapped sellers both give ground on price expectations after a collapse in natural gas markets, UBS AG said. The dealmaking will probably begin as gas producers sell assets to raise cash, said Stephen Trauber, UBS’s global energy chief. Corporate takeovers will then pick up as executives weigh the shareholder value merits of selling equity at a discount to bring in more cash versus selling their companies outright at a premium. “Major oil companies have been waiting with the expectation that gas prices in particular, which is what many North American companies are based on, will continue to weaken.....Complete Story

Tuesday, August 18, 2009

Gold, Oil and Copper -Is it That Time of The Year Yet?

From guest analyst John Winston of Technical Commodity Trader

Over the past 5 months the markets that crashed have staged a significant comeback. While the stock market usually grabs the headlines, there have been some great commodity runs as well.

As the season’s change, the demands for commodities vary according to each respective market. Below is the 15 (Red)and 40(blue)year averages of the Copper seasonal price chart. One of the more prolonged downtrends on the chart shows that from September to the middle of October, copper is usually weak. We can see the demand PHASE of this commodity is the December to April time frame.

(NOTE – Do not follow the yellow months. Those are futures contracts, follow the blue months at bottom of chart.


Now let’s look at how copper has performed in relation to this chart. Shown below, the price chart of copper shows that a rally formed from December thru April right on time. In fact we can see how April’s high was in a very tight range, bouncing off the $4 dollar area each and every week in April. Interestingly, look at the seasonal chart. Notice how it also has a tight range for most of April. Sometimes price plays out exactly as it should, and other times, it’s a bit harder to see. Although there was a spike high in May, on a closing basis April provided the high and the correction lasted until the beginning of June before rallying to July. So far so good and a very accurate price comparison was in play. And then the meltdown of 2008 began.

Just like every other commodity and financial instrument, the price of copper collapsed. Instead of moving sideways over the summer and providing a September peak, copper began drifting lower into August. But the rally into September never appeared. If you look on the chart you can see August wend sideways and as soon as September arrived, the market drifted lower fighting to stay above $3 dollars. With the seasonal kicking in at around the same time, copper never stood a chance. The bearish factors overwhelmed the metal and the price retreated to $1.25 by years end.


Now by this time, the UP portion of the seasonal came into effect.
We can see that the December to April time frame of copper strength played out as we rallied right into April and we rallied strong. Here again the pullback was only 5 weeks and price began moving up again. In retrospect, a May high was indicative of strength as price rallied. Finally the June pullback came into effect and prices retreated to a June low. So rather than correct down from May to June, copper was so strong that it’s retreat only started in June and then corrected to the seasonal low into July. Again, this was a sign that copper was still very strong.

What next?

Copper is arriving at the point of the year in which weakness usually sets in. If we look at the seasonal chart it indicates that on average, copper peaks around the first week of September and barring a few short cover rallies, usually bottoms in December. This ebb and tide has been transpiring on average for the last 40 years so it is good to keep in mind. It is not a guarantee that price will correct. As a matter of fact, when a seasonal inversion happens, the moves are usually violent. But inversions are the exception, not the rule. The rule is that copper usually peaks in price near this time of year. For those who have played this run, it might be a good time to prune a little.

So where and what should we be looking for?

COPPER SPOT WEEKLY CHART


I’ve highlighted two areas on the chart by circling them with a red oval. Notice how this is the 2.95 – 3.30 ish area. Now let’s move over and look at price. We can see that price is just arriving at the $3 dollar area. By looking at the action circled, we should surmise that this is a very important area on the price chart. And look at copper jumping up and over its trend channel and arriving at this resistance area just when the seasonal highs are due to take place. Therefore, over the next four weeks, copper should provide us with a peak in price and a pullback into December. It certainly has been powered in some part by the China factor. In fact, the Canadian Dollar really took in on the chin earlier this week on concern with the Shanghai Index as it took a 17% haircut recently. If we keep in mind that this market has doubled since March we see that the pullback although steep, is still within the confines of a rising market. Nevertheless it was enough to rattle the Canadian dollar, which is a great “currency” proxy for the metal and mineral markets. China has been a huge importer of copper. If they take a break here, copper should also.

If copper’s rise slows right here and begins to consolidate, it will suggest that the resistance above the 3 dollar area is still in effect. And look at price. It’s sitting on top of the blue channel line. This will be a tough line to stay above. As long as it does, it is displaying incredible strength and we should stay with it. But a dip back into the channel and then a failure trying to get back above that line (where it becomes resistance) might be a good clue to suggest the seasonal pullback into late fall is taking effect.

Conclusions

The seasonal change coming and the chart resistance would suggest that an interim peak in copper should be developing over the next four weeks in the price area of $2.95 to $3.35. From there, we would look for a pullback to the bottom of the blue channel line around the $2.25 – 2.50 area sometime late in the fall or very early winter would be the seasonal tendency for this metal.

Crude Oil

How about Crude oil? Things have been very choppy lately. Are we peaking? Interestingly, if we look at the seasonal chart, we can see that crude oil usually has a very choppy August, with up and down and sideways action. The good news for the bulls is that the Crude oil market still has about another 6-8 weeks left of its seasonal action.

(NOTE–Do not follow the yellow months. Those are futures contracts. Follow the blue months at bottom of chart.


In the crude oil chart below, we see the same meltdown of 2008 as we did in Copper. But other than that, the chart is following seasonality “this year”. But let’s look at what happens when “seasonality” inverts. You can see we bottomed in February of 2008 in February and we rallied to April. So far so good. But instead of pulling back into July and making a low, look how we exploded up and made a high in July. In fact, crude oil was the “MEDIA BOY” at the very peak. That its final ascent was a seasonal inversion will be something to keep an eye out for when we watch other inversions in the future. But that was it. When everyone got back home from July 4th vacation it was the end for crude as it virtually collapsed.



By time crude stopped plunging it was December. A look at the seasonal chart shows that the lows for crude are the December and the February area time period. Look how crude made a December low and moved sideways right to the last week of February and made its lows at the 33 area. Thus this year’s oil bottom was right on time as far as the seasonal goes. The pullback from April to May developed, but May was very strong and seasonally, it’s usually a sideways market. This is a sign of strength. And how about the July low in crude? On the chart the pullback did not begin until June (very late) and it lasted only 4 weeks. This was another sign of strength. And so now here we are in the middle of August and prices are knocking on the door of above 70 for the second time. Will Crude peak out here?

While it is getting late in the game, the seasonal suggests not yet. On average, the peak is not due until the October time frame. But we want to be on guard when price slows.



The crude chart above suggests that RESISTANCE is the 90-100 dollar area. I’ve highlighted the area from late 2007 where that resistance or pressure point area exists with a red circle and have drawn an arrow towards that resistance point that is coming up.
Should the rally continue odds favor a peak near or at that area and then a pullback into February?

At this time we are in an uptrend channel as price is within the blue channel lines. As long as price remains above the trend line or the lows established in July, the trend is intact and odds will suggest higher prices. As we near the end of the seasonal, we always have to be on guard for weakness. For instance, notice how we recently made a double top in price just above 70. If we look to the very far left of the chart we can see that in August of 2007 price just happened to be where we are today......at the 70 area. Notice how that year had a small pullback in September before the rally into late October/early November. That pullback support was the 70 area, and as you can see we are encountering resistance at this price point also. But in 2007, it was just a pause, and small pullback before the next leg of the rally. When price finally did peak at October’s end, notice that the correction that began was sideways at best.....indicative of strength. Sure enough, prices started a rally right around the end of February where the seasonal suggests bottoms are usually made.

So what do we make of this rally? It is maintaining its uptrend momentum and velocity when it is inside the blue channel range. I’ve noticed over the past four weeks that we have been hanging around the bottom end of that channel and it would be nice (if you’re a bull) to see a thrust above 75. That would increase the odds that the September portion of the seasonal would be under way. Keep your eyes on the US Dollar also. Moves above the 80-82 area could put a lid on crude prices.

For now (barring a dollar rally), odds suggest that the rally is not complete. We have support at the 57-60 area should the blue channel line not hold price. Either one of these areas should provide support. Lastly, I’ve drawn another circle under the 50 dollar area. This area has a good chance of providing support for next year’s pullback near winters end.

Gold

Finally tonight we want to take a look at gold. Here’s the seasonal chart below.


We can see that we are at a key time for the gold seasonal. Lows are usually made right at the end of August. Interestingly, we are only about 30 dollars above the July lows, and the choppiness we’ve seen in gold is actually what the seasonal suggests this time of year. What’s important for gold is what lies in front of us. September. You can see that a nice rally usually develops from somewhere in this time frame. The “optimum” time is about to arrive. Like the other commodities gold also went to the barber shop last fall. But unlike all other commodities, gold has returned to its highs.....a real sign of strength so far. I say so far because we must also conclude that gold has not made a new high for 18 plus months. Many are anticipating a tremendous rally should the highs succumb to price.



If the seasonal plays out then a rally is due to begin within two weeks and a September rally will ensue. One needs be careful however, as the metals are also well known for pullbacks in the October and November time frames. When gold is very strong it will bypass or only pullback slightly then and move into its winter peaks. However, in a normal year, gold has a decent pullback in that time period (Oct/Nov) as well.

The tremendous consolidation and current coiling action in gold makes us sure of one thing. A good sized move is coming up. I’ve drawn two key trend lines on the weekly chart above. As long as we are above those up channel lines, we should assume a fall rally. The end of August is notorious for a steep drop and reversal for gold. Keep your eyes open. Should there be a big thrust down towards the lower channel lines on the chart above, and then a subsequent reversal and turnaround back up in early September, then the odds will greatly increase that the fall rally is under way.

On the upside, traders and technicians are looking at this triangle formation that has developed on the chart. Moves above the 975-985 area would greatly favor an upside breakout and moves above the 1075-1100 would be indicative that the next leg of the gold market has begun.

Conclusions

The gold market is close to starting a good move. Many participants are expecting an upside breakout. While that may well be the case, make sure you keep your eyes on the downside too. The “inflation” scenario is a crowded one and the dollar bull is a rare specie at this time. While I won’t argue the inflation point, I want to see price confirm such an occurrence.

On the chart there are two channels that are PARAMOUNT to an uptrend support. There is also a blue horizontal line showing support at the 850 level. Should we begin to break these red trend lines, especially the lower one, it will be a warning to gold bulls that all is not right underneath. This is especially important this time of the year as gold is usually strong after August. Should a drop occur in the next few weeks that hold’s any of these support areas, it just might end up being the low before the fall rally. However, any break of the 850 area would be a warning shot across the bow that gold’s seasonal move would be in serious trouble. So keep your eyes on the 850 – 880 – and 925 area in gold.

If these support areas hold and gold breaks above the triangle lines and 975- 985, the upside will be the odds favored move in the coming months.

Closing thoughts

While copper and oil have led the charge since the lows in commodities, the seasonal price averages of these commodities suggest that first copper and then oil should hand the baton over to the gold market at some point in time this fall and take a break while gold leads the pack up.

Since we live in strange times, one needs to be aware that a US Dollar rally could squelch these commodities should it embark on a rally. Interestingly enough, the dollar index is at a key spot on its chart. Should the dollar move above the 80 area, and then the 82 area, oil, gold and copper will have a lot of potential price pressure put upon it. If you do venture into this area, keep one eye out for the US dollar and moves above the 80 area on the index.

If you would like to receive John's free weekly trading reports please visit his website at the Technical Commodity Trader

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