Bullish on Natural gas
Commodity had an impressive rebound
since US dollar peak recently. For example, Crude oil rebound over 30% from the
bottom. I think we can a reflation phase in economic cycle and commodity
undergoes a cyclical bull market that created by global easing. However, some
of commodities still are underperformed. One of example is Natural gas. I turn
bullish on this asset and explain my rationale as follows.
Figure 1: Natural gas had fallen
over 50% since Feb 2014 and breakthrough a triangle pattern to build a bottom.
Source:
Stockchart.com
Figure 2 and 3: Crude oil had
rebounded over 30% and the ratio Crude oil price to Natural gas is still high
at historical standard. I expect Natural gas price eventually catch up the rise
of Crude oil price.
Source:
Stockchart.com and Ned Davis Research
Figure 4: Hedger Long position
(Smart money) reaches a record high. It means short covering in Speculator
position is coming soon. It will fuel rally of Natural gas.
Source:
SentimentTrader
Figure 5: Market Sentiment hit an
extremely pessimistic level. Most of bad news had been priced and rebound is expected
to take place.
Source:
SentimentTrader
My takeaway is Natural Gas had started
a cyclical bull market due to a waterfall decline, extremely pessimistic
sentiment and ongoing reflation phase in economic cycle. A impressive rally is
coming soon.
