Natural Gas

On September 5, we observed a new, large pattern in the natural gas futures whose midpoint at 3.072 might reward a tightly-stopped short sale.  After peaking at 3.070, the futures have dropped enough to deliver profits of more than $1400 per contract to traders who took the risk.  The pattern's 'D' target of 3.534 will remain in play so long as the 'C' point of 2.610 is not revisited in the meantime.  The thrust up to the midpoint is itself a classic impulse wave, and the subsequent decline puts us into position to form a 'C' point for that pattern.  If the low of 2.856 holds, the 'X' entry point will be 2.962, although the futures appear to be inching toward that low tonight, so traders will have to keep track and recalculate if necessary.  If it does hold, neither the midpoint nor the 'D' target will be tradeable, as they are both almost exactly equal to important prior highs (specifically, the 'B' points of the two patterns we are looking at right now).  But a somewhat lower 'C' will 'hide' both pivots and make them eligible for short-selling.  (Posted by Doug “harry” McLagan)

Natural gas appears to have completed a significant pullback and is now aiming for a series of bullish targets ranging as high as 3.534.  The large pattern in question began on June 14 and made its 'C' low a week ago.  The midpoint of the pattern is at 3.072, a well-hidden pivot that might reward a short sale with a tight stop.  Its 'D' sibling is all the way up at 3.534, which would be a high for the calendar year of 2012.  In the meantime, we should watch the smaller, still-tentative pattern shown on the attached chart.  The 'C' point is at 2.840, and that gives us an 'X' point of 2.872.  Traders should be ready to recalculate in case the 'C' point is pushed somewhat lower.  (Posted by Doug “harry” McLagan) _______ UPDATE (3:15 p.m. EDT):  The 'C' point of our smaller pattern has been pushed down about as far as possible for the pattern to retain its value.  Given that nat gas makes its big moves during the early pit trading hours (beginning at 9:00 a.m. Eastern time), it's always a good idea to take a fresh look at the shorter-term patterns an hour or two before the pit opens.  That said, if the 2.780 low holds, we might expect resistance overnight at 2.843, the midpoint of our pattern as it stands.  The 'X' point is at 2.812.

Natural Gas futures were trading for around 3.58 in November when we projected a possible bear-market low at $2.30. Imagine our excitement when, ten days ago, on January 23, the March futures contract trampolined from within exactly 1.6 cents of our target, shattering the despair and deathly calm of a relentless, multiyear sinking spell that had not seen respite since last spring. The initial leap was enormous, to 2.63, and anyone who bought down around the target would have reaped a $3400 profit per contract on the first day of the move. We had prepared subscribers for a potentially tradable bounce, reiterating our contrary stance on January 12 with this advice:  The futures were barely able to muster a dead-cat bounce on that last effort.  Even so, the 2.305 will remain a good place to try bottom-fishing aggressively with our habitual penny-ante stop-loss. At the time, the futures had been falling, falling, falling, but they were still well above our target, trading around 2.80. However, the next week saw them plunge, kamikaze-style, precisely to the Hidden Pivot support where we had anticipated a turn. In tracking our own recommendations, we never assume subscribers are making money merely because a trade that we advised triggered. In this case, a subscriber reported in the Rick’s Picks chat room (click here to access this 24/7 service free for a week) that he had indeed bought some contracts at the 2.30 target. And so we established a “tracking position” to guide him and any other subscribers who had caught the low.  In the ensuing days, the steep rally continued, peaking on January 26 at $2.84. At that point, each contract purchased would have racked up gains of about $5400 before commissions. We advised partial-profit taking that effectively reduced the cost basis on the 25%

Although we’d be thrilled to be able to brag a year from now that a trade we recently advised in Natural Gas futures caught a bear-market low within two cents, we’re not prepared to bet the farm on it. Similarly, a winning gold trade that got stopped out earlier in the week may have caused us to miss a moon shot, but we’re not about to look back. For when all is said and done, we’d rather not be prayerfully holding our breath or losing sleep as gold in particular swoons, leaps, caroms and careens its way higher. Aggravation and stress aside, on a simple risk:reward basis there is never justification for buy-and-hold speculation. Yeah, we’ve heard the story about the commodity whiz who made $50 million riding a brahma bull in soybeans/cattle futures/crude oil all the way to the top. But the guy couldn’t possibly have made all of that money without experiencing devastating setbacks along the way. And he could not have kept doubling down on subsequent trades without giving it all back. In our book, it is slowly but surely that wins the race, and the massage we preach to subscribers and students who take the Hidden Pivot Course is to never risk more than $1 to make $3. This applies along the entire route of a trade, from entry to exit. Moreover, we recommend that positions be constantly  “worked” so that s trader’s hard-won gains will not be entirely and constantly at risk. How does that advice relate to the chart above?  To begin with, when we advised buying eight gold contracts in two places below current levels, we “knew” exactly how much we stood to make on the trade because our proprietary technical indicators said a 1771.50 target would be reached come hell or high

The March futures are within pennies of achieving the uber-bearish 2.305 target given here around Thanksgiving, when they were trading nearly 60% higher.  While there can be no guarantees that a major bear rally is about to unfold, it is an opportune moment for camouflageurs to hunker down on the lesser charts, there to await a potentially tradable turn. _______ UPDATE: I posted the following in the chat room shortly after 1 a.m. EST:  To see (almost) exactly the kind of opportunity I'm talking about, locate the following NGH12 coordinates on the three-minute chart: A=2.334 at 9:30 p.m. EST; B=2.350 at 9:54 p.m., and C=2.343 at 10:09 p.m. If you spotted the flaw -- a two-bar point 'C' -- then go to the head of the class. The bad news is that if the little sonofabitch is not giving us exactly the pattern we want on the first instance of an upturn on the very lesser charts, it's going to be tricky to get on board. Regardless, I'd stick with the '3' to find a way aboard.   Click here to find out about the upcoming Hidden Pivot Webinar and receive a $50 discount.

Natural gas quotes have been in a death spiral for so long that it's probably time to start paying attention.  I've sketched out a detailed 'camouflage' scenario in the chart accompanying today's tout, including a specific screen alert that could help you get long. Check it out if you want to see what low-hanging fruit looks like.

Wow, does NatGas ever look sick! We managed to wring a theoretical gain of more than $300 per contract trading from the long side last week, exiting on a 3.345 stop. However, judging from the way this crudball is eating through important supports, one could infer that the price is going to $2 or lower (not that that would cause anyone's heating bill to decrease by even one iota). Next stop: 3.242.  If you trade this one -- long or short -- it'll be catch-as-catch-can.  _______ UPDATE (November 22, 8:01 p.m. EST):  Just when lower lows were beginning to look all but certain, this zombie has rallied to within an inch of creating a bullish impulse leg on the hourly chart. If it should do so by popping to 3.484 today, the December contract would become a bull trade on the hourly chart for the first time in as long as we can recall.

Traders could have caught a nice ride yesterday from an interim low at 3.387, since it fell within 0.003 points of a Hidden Pivot support flagged in the chat room by 'Pivoteer' and amplified in my tout. The subsequent bounce would have been worth as much as $500 per contract if you'd exited before the futures relapsed down to a so-far low of 3.325 Wednesday night. That's a penny beneath my worst-case bottom, but I still expect a major rally from very near these levels, so camouflageurs are advised to remain diligent. I'll suggest using the 5-minute chart, since the bars are very thin if you go any lower.  If you'd prefer to use UNG, the NatGas ETF, the 7.32 pivot given here yesterday is still the place to look for a tradable turn. ______ UPDATE (11:35 a.m. EST): A 'camo' pattern launched at 4:50 a.m. from 3.341 would have triggered a long from 3.386. Half of a four-contract position would have been exited at the 'p' midpoint of the pattern, 3.401, and a third contract at 3.430, the 'D' target.  The remaining contract, adjusted for theoretical gains thus far of 7.50 cents, has an effective cost basis of 3.311. Let it ride for now with a fixed stop at 3.345.

There was some interest in forecasting Natural Gas prices in the chat room yesterday, so I decided to take a crack at it myself.  Lo, the moderately big picture, vivid in the 240-minute chart I've reproduced alongside, suggests the December contract is close to a potentially important low.  The actual low so far has already exceeded my Hidden Pivot target at 3.416, but not by much, and the pattern itself is sufficiently clear that we should expect a tradable price reversal from somewhere near current levels.  Please note that I have allowed room for a somewhat lower low at 3.336 that would result if we use a plausible higher 'A' as the starting point of this down-cycle. Let's try to get long using camouflage tactics near the 3.384 midpoint (5-min, A=3.456, B=3.390, C=3.417) of a pattern identified in the chat room by 'Pivoteer'. FYI, an ETF said in the chat room to mimic NatGas futures bears the symbol UNG.  If it were to bottom at a target equivalent to the one above at 3.416, the turn would come at around 7.32.  This is caveat emptor, since, as I've been warning subscribers for years, ETFs were created for the sole purpose of shorting puts and calls to rubes.