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Potential Trade Idea - Long Carbon Emissions - Short Natural Gas

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@dmedin,

Another Carbon Emissions related thread if you are interested. The Natural Gas short trade has been a profitable one for those who have partaken. 

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Natural Gas is in free fall and the glut of supply may have something to do with it. 

I think we could be looking at around 1700 - 1800 for Natural Gas in terms of any price support when you look at the 'Monthly' which is what is required now for Natural Gas which I have shown with the 'blue rectangle' below.

2121700257_NaturalGas_20200118_12_14.thumb.png.9ae9e6df6e6da710eb50a006e5a9c24d.png

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Has anyone got gas?

Could be a good short to 1655 if it bounces of 2027 as a resistance level.

2079202096_NaturalGas_20200218_16_26.thumb.png.c8f560243a7ac9139b3fc2ef30506edb.png

 

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@dmedin,

You may be right but the problem is that Natural Gas may not hit that low as per the 'monthly' and 'weekly' timeframes. It would certainly be a high risk short. 

Have a look at my other Natural Gas thread called 'Potential Breakout'. 

I can see your logic but that trade is too high risk and also does not adhere to my trend following trading principles. The price has gone above its 20 DMA on the 'daily' and is heading towards its 50 DMA. Right now a short trade is very tricky with absolute no guarantees that the low you are referring to will be revisited. 

However, you may be right and for those who are shorter term traders, brave and have a higher risk tolerance/appetite, it may be worth considering. 

2003606118_NaturalGas_20200218_17_29.thumb.png.534005b7d5f31e6eb006a7873fe627a4.png

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Got gas? 🌬️ Could be a nifty wee short. 

249330534_NaturalGas_20200220_12_24.thumb.png.cdb3c1d957e54537b7cd19ee642bfcca.png

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Phew!  What's that smell!  Has someone got gas?

Well maybe it's moving up to close the window, it has another window to close on the way down again :)

1547796863_NaturalGas_20200220_15_59.thumb.png.d8c94ac8e8a0fd7babb875a9ba1350ae.png

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@dmedin,

I don't see any signal/indicator to initiate a new 'short' trade right now. That is not to say that Natural Gas cannot decline further. Of course it can but based on technicals I would want to see the 'Monthly' and 'Weekly' Support areas broken on the downside. 

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The doji is a (potential) sell signal, let's see what happens:

189844801_NaturalGas_20200220_17_27.thumb.png.4655d670e660db932819b2273f0cae4e.png

 

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@dmedin,

I appreciate you are looking at the 1 hour chart. I tend to look at the 'daily' chart. There is a gap (can at times provide us with clues but no guarantees of course). 

885797980_NaturalGas_20200220_17_33.png.931c2f07ae1490abdeab32ea5928f0d3.png

Your red doji scenario is short term but when you look at the chart above which is only 3 minutes after you posted but in a different timeframe then you can see the difference. 

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It worked out for me this time, good trade!

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It looks like a good candidate to re-test its lows from 2016, see below.  For that reason I like the idea of chipping away at it, selling any rallies.  There's also the fact that >90% of IG clients are long.  :D

1885247600_NaturalGas_20200221_13_56.thumb.png.0078c43d5c44f62875e7d848a3829496.png

Edited by dmedin
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@dmedin,

You may be right in terms of the direction but the price action going forwards will confirm this. It may be that the lows are breached and new lows are created.

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What's that smell? - has somebody got gas?  Nobody wants gas!

1857962178_NaturalGas_20200224_05_57.thumb.png.301ef0b2270c5eb4cf7b7171c19a8423.png

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14 minutes ago, TrendFollower said:

@dmedin,

I can see short term Natural Gas going down to around the 1820 price level. 

I'm shooting for the 2016 lows at 1650!

 

1820 is a good first target though!

Edited by dmedin

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Gas continues to be a good short!  Phew, what's that smell :D

 

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@dmedin,

Natural Gas was a good short from November 2019 onwards. The bulk of the move has come and gone. Of course there may be more to come but I think the majority of drop has occurred. 

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I still think there's a bit of gas left in the tank! 🌬️

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@dmedin,

Let us see exactly how much gas is left in the tank. Just be careful as Natural Gas can be extremely volatile and turn when you least expect. It is a very difficult asset to trade. 

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It's been hanging around 1870 resistance.  Doesn't seem like it can hold above it.

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@dmedin,

It is currently around 1850 but it is not acting right now like a strong trending downward asset. Nor is it screaming an excellent short based on more recent and current price action/behaviour. 

I think the majority of the downside is priced in. Of course it may go down but I am intrigued now to see what it does. 

From a fundamental perspective the cheaper Natural Gas gets the greater the demand potential becomes as it becomes cheaper than other energy alternatives. 

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2 minutes ago, TrendFollower said:

@dmedin,

It is currently around 1850 but it is not acting right now like a strong trending downward asset. Nor is it screaming an excellent short based on more recent and current price action/behaviour. 

I think the majority of the downside is priced in. Of course it may go down but I am intrigued now to see what it does. 

From a fundamental perspective the cheaper Natural Gas gets the greater the demand potential becomes as it becomes cheaper than other energy alternatives. 

 

I'm thinking it looks like a perfect candidate to re-test 2016 lows.  That's a good 200 odd points.  No sign of a recovery.  I don't know the fundamentals of the gas industry but oil is sinking for well-known reasons so no reason to suppose gas doesn't too?

Edited by dmedin

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@dmedin,

You make a valid point and it is certainly possible.

Current fundamentals for Natural Gas are a glut in supply. This has been the case for many years now. So it certainly is bearish but it has been for many years now. 

I think looking at the fundamentals for the commodity you are trading can really help you understand the narrative behind the price moves. It can support or not support your trade and you can use it with the technicals to help you make more effective trading decisions. Some the key fundamentals for commodities are 'Demand', 'Supply' and 'Weather Conditions'. Also the US Dollar can play a part too. If you can see a strong narrative behind the price behaviour then it can reinforce the direction of the trade you look to execute. 

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