Bullish on Natural gas

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.