NG: The End (of $2.50 prices (for now))
Natural gas has been even more wild than usual.
There is "only" about a 30 year history to go off of to look at this commodity. Even so, we have actually had a few notable firsts.
The 2022 rally was one of the most violent in history. It went from a 2020 low near $1.50 to $9 in May 2022. In percentage terms, it was not quite as good as in 2002-03, where natural gas bottomed out near $2 and then went as high as $15 for about a week.
It also lasted a while. Prices remained near highs for the better part of a year - about 8 months. Compare this to 2005 (barely 4 months near the highs) or 2008 (spent ~5 months climbing before a crash). Notably, though, the 2022 natural gas highs have nothing on 2003-2008 as a whole, where it barely went below $6 that whole time.
Just to make sure this makes it into the record books, the decline has also been catastrophic. Jan. 2023 was the worst month for natural gas since Jan. 2001. If you take the worst 30-day period (sometime in mid-Dec to mid-Jan) of this decline, you should find it is actually the worst 30-day performance for natural gas ever in percentage terms.
Basically, it is at historically oversold levels. Not only that, but you can see clear & repeated demand wicks as well the major support level here. This alone should add up to a substantial bull case.
The only thing that I don't really like about going long here is that I see a bunch of traders are focused on buying or trying to buy. However, when looking into the actual market data, I was surprised to find that many more people are currently short on natural gas.
I think the bearish pattern (head & shoulders) from 2022 has completely played out by now. In the past, natural gas takes years to recover from this sort of move (see 2008.) We seem to be making history lately, though, so why not a more substantial rally?
There is "only" about a 30 year history to go off of to look at this commodity. Even so, we have actually had a few notable firsts.
The 2022 rally was one of the most violent in history. It went from a 2020 low near $1.50 to $9 in May 2022. In percentage terms, it was not quite as good as in 2002-03, where natural gas bottomed out near $2 and then went as high as $15 for about a week.
It also lasted a while. Prices remained near highs for the better part of a year - about 8 months. Compare this to 2005 (barely 4 months near the highs) or 2008 (spent ~5 months climbing before a crash). Notably, though, the 2022 natural gas highs have nothing on 2003-2008 as a whole, where it barely went below $6 that whole time.
Just to make sure this makes it into the record books, the decline has also been catastrophic. Jan. 2023 was the worst month for natural gas since Jan. 2001. If you take the worst 30-day period (sometime in mid-Dec to mid-Jan) of this decline, you should find it is actually the worst 30-day performance for natural gas ever in percentage terms.
Basically, it is at historically oversold levels. Not only that, but you can see clear & repeated demand wicks as well the major support level here. This alone should add up to a substantial bull case.
The only thing that I don't really like about going long here is that I see a bunch of traders are focused on buying or trying to buy. However, when looking into the actual market data, I was surprised to find that many more people are currently short on natural gas.
I think the bearish pattern (head & shoulders) from 2022 has completely played out by now. In the past, natural gas takes years to recover from this sort of move (see 2008.) We seem to be making history lately, though, so why not a more substantial rally?
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