August 8, 2013

Logical Market Update: Nat Gas Surges Higher Off of Intraday Lows

Natural Gas Surges higher Off of Intraday Lows

On the Third Day of the Correction the markets gave to me…

Three parabolic earnings trades, two panic buyers and a bear pushed up a pear tree.   Interesting and yet transparent the markets moved back into cross hedging mode – what I mean by this is that time when traders look to a parallel market for direction.  Like treasury yields and the equities markets or the price of gold and the movement in the U.S. Dollar.  This type of action tends to slide around the globe from the U.S. to the Asian markets to Europe and then back to the U.S.. 


Tesla Motors and Groupon exceeded earnings expectations with TSLA pushing to new all time highs on Thursday.  Groupon jumped back above $10.  The other sort of parabolic move (down) was in Green Mountain Coffee Roasters, which slumped.  Overall though, the broader indexes continued to trace out “bounces” after moving lower the first three days of this week. 


Treasuries stood firm on Thursday and optimally will continue higher tomorrow.  The Precious Metals quickly absorbed early weakness as gold powered back above 1300and silver moved back above 20.  Mining stocks were some of the better performing on Thursday as evidenced by the 8.6 % jump in the GDX and an 8.8% jump in the HUI.  It is too early to declare these markets as having reversed just yet, but as discussed on Wednesday I am watching intently for opportunities.  Traders using the Hawk, Falcon, or Eagle platform from Indicator Warehouse and looking for tradable moves may elect to add GDX, GLD, and SLV to your roster of indexes and ETFs. 


The Euro moved up to the 1.34 level on Thursday with the run up being the best for trading.  Once again, the market sat in a very tight range for the better part of the session.  The Euro has pushed into overbought readings suggesting a pull back/period of consolidation is likely.  Without the markets turning lower again or the bond market resuming its decline any consolidation has been held to higher levels. 


Natural Gas increased its intraday range today after the EIA (Energy Information Administration) reported that U.S. natural gas stocks increased by 96 billion cubic feet last week.  Expectations were for 74 to 78 billion cubic feet.  The futures were already down heading into the report and spiked lower right after.  Support at $3.176 was breached and quickly recovered with prices then finishing up almost eight cents or 2.37%.  The momentum generated by the swift decline and surge higher gave buy signals up to and including the weekly chart (an updated chart is below.)  The monthly chart keeps alive the potential for a continued decline dropping prices to next support at $2.875. 


Natural Gas (Weekly Future)


Even with additional downside potential prices should continue to rally.  More to catch up with EIA average price expectations for the balance of 2013 at $3.71 to $3.76, with average expectations for 2014 coming in at $3.95 per million BTUs.  If an additional down leg it yet to occur I would expect a rebound rally to reach back towards $3.47 to $3.55 over the near to mid-term. 

Bollinger Bandsmeasure the “high” or “low” of the price relative to previous trades and are considered a volatility indicator.  Therefore by definition prices are high at the upper band and low at the lower band.  This definition can help in pattern recognition and when combined with additional indicators help to arrive at decisions as to direction or trend. 


The chart below keeps in perspective just how far Natural Gas prices have dropped and the channel that should contain additional selling if a near term rally is to take hold. 

Natural Gas (Weekly Future w/Bollinger Bands)



Indicator Warehouse


Indicator Warehouse has in my opinion the best platforms available covering a wide range of traders from novice to expert.


The Diversified Trading System from Indicator Warehouse offers cost effective products that allow a trader to enter into the “chaos” and trade more effectively.  


Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility.  Automated stop-loss management and position sizing eliminates most of the problems most individual traders have.  Day trading and position trading both require (actually demand) good risk management.  Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades. 


A newer member of the money management tools available from Indicator Warehouse is the Profit Finder – System Back Tester When implemented it allows the user to:

  • Immediately know the impact of parameter changes. 
  • Automatically reads all of your DTS entries and exits
  • Calculates the profit/loss of each trade
  • Performs a wide number of essential intelligence boosting calculations instantly
  • Provides solid details about the effectiveness of your trading strategy/ methodology/ indicators


The last two points above are valuable tools to use.  It will show you where some “tweaking” is needed to improve results through the back testing feature. 


My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames.  As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.”    Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System.  Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms.  Our goal remains to assist traders to make greater profits during all types of markets.  Sector and money rotation is another tool.


The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).    In the near future I will be adding options strategies to the trading list. 


Here is an updated (7/31/2013) list of the markets where I have found that DTS (all three birds) are producing numerous signals.  Continue to bear in mind that there are days when trading opportunities are not as plentiful.  These are days when not trading is likely more profitable than attempting to “force” a trade”:


  • DJIA future (e-mini available) – highly recommended for experienced traders
  • S&P-500 future (e-mini available) – highly recommended large intraday moves.
  • Russell 2000 future (e-mini available) – highly recommended can lead in either direction.
  • NASDAQ 100 future (e-mini available) very highly recommended and dominated by AAPL, AMZN, NFLX, GOOG, and TSLA
  • US$/Euro futures (e-mini available) – very highly recommended – easy to trade afterhours as well.
  • V (Visa) – stock and options – recommended – large swings in both direction likely
  • MA (MasterCard) stock and options – recommended – $600 stock – large swings likely
  • GS (Goldman Sachs) – good two way volume –
  • AAPL (Apple Computer) – highly recommended – Options trading as well
  • GOOG (Google) – highly recommended
  • LNKD (LinkedIn) – solid intraday range
  • NFLX (Netflix) – solid intraday range
  • TSLA (Tesla Motors) – highly recommended 
  • 30-yr Treasury Bond future – highly recommended
  • 10-yr Treasury Note future – solid two way trade
  • TLT (Treasury Bond Long ETF) – very active
  • TBT (Treasury Bond Short ETF) – very active (moves inversely to TLT)
  • Gold (futures and ETF – GLD) very active – not suitable for all traders
  • Silver (futures and ETF – SLV) – very active – not suitable for all traders
  • EURO FX (futures, mini and micro contracts available) very active suitable for all account sizes