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Natural Gas Trading: Buying The Dips In July Contract

May 29, 2019  

Trading Positions

We have reduced our long exposure earlier today and have slightly increased our short exposure (to hedge the existing long positions). So far, the return on invested capital in May has been 7.20% in futures and 3.30% in ETNs (see the tables below).

Technicals

Yesterday, natural gas July contract touched the lower bound of a symmetrical triangle (see the chart below). It may now attempt to re-test the upper bound of the same triangle. Previously, a cup and handle pattern called for even lower prices, but that bearish pattern has since been negated by today's rally.

The Weather

Last week, the number of cooling degree-days (CDDs) jumped by 56.0% w-o-w, as weather conditions warmed up significantly across the country. We estimate that total energy demand (as measured in total degree-days - TDDs) was approximately 10.0% above last year's level and 12.0% above the norm.

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