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Chart Of The Day: Natural Gas To $13.25

By Pinchas Cohen/Investing.comCommoditiesAug 23, 2022 06:22AM ET
www.investing.com/analysis/chart-of-the-day-natural-gas-to-1325-200628878
Chart Of The Day: Natural Gas To $13.25
By Pinchas Cohen/Investing.com   |  Aug 23, 2022 06:22AM ET
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+2.58%
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A flurry of news concerning natural gas could confuse traders.

French TotalEnergies (EPA:TTEF) and Italian Eni (BIT:ENI) supermajors discovered a vast natural gas deposit, which will help Europe reduce its reliance on Russian natural gas. However, unfortunately, it will take some time until it's ready to be delivered. So, it doesn't alleviate Europe's energy crisis at the moment.

Also, the idea that Canada would become a natural gas supplier to Europe is fizzling, as it will take three years before new projects necessary for long-term supply will come online. Also, long-term investing in liquified natural gas conflicts with the West's priority to develop cleaner energy sources.

Meanwhile, Europe is committed to cutting 15% of its natural gas consumption. Denmark already reduced its consumption by almost 29.3% in the year's first half to reduce soaring prices, which could not come at a worse time for the continent.

The slump in the euro, which has fallen below parity to the dollar for the first time in 20 years, has exacerbated the spike in commodity prices. Moreover, I predict the single currency is headed lower yet, further compounding the rising cost of NG.

Natural Gas Daily
Natural Gas Daily

The contract opened higher, creating a breakaway gap despite the news of the natural gas discovery off Cyprus by the two energy majors, demonstrating that traders do not consider it relevant at this time.

A rising gap, especially one that breaks away from congestion, is bullish, meaning there were only buyers at those prices. Furthermore, the gap's location reinforces a large H&S continuation pattern.

Implied Target

Like in a reversal H&S, traders measure the pattern's height at its lowest point. That is the lower part of the neckline. They expect the same interest within the design will trigger a similar move on the other side. Therefore, I forecast the medium-term activity to be $3.965 from the $9.290 breakout point, targeting $13.255


Natural Gas Weekly
Natural Gas Weekly

The price has been rising for the third week, forming tall green candles on the weekly chart. If NG maintains its gains into the weekly close, it will complete Three Advancing White Soldiers, a three-candle bullish pattern, showing long-term strength.

However, they often precede short-term declines, during which the candles' first or second provide support. Such a scenario would jive with a return move following the breakout completing the H&S continuation pattern, as the neckline coincides with the second candle.

Trading Strategies

Conservative traders should wait for the return move that reinforces the neckline's support before committing to a long position.

Moderate traders would risk buying the contract upon a dip for a better entry, if not further confirmation.

Aggressive traders could enter a contrarian, short position, then follow up with a long position, along with the rest of the market. A coherent money management system is essential for successful trading. A trading plan should incorporate your timing, budget, and temperament. In case you don't know how to do that yet, here are generic examples for practice:

Trade Samples

Aggressive Short Position

  • Entry: $10
  • Stop-Loss: $10.25
  • Risk: $0.25
  • Target: $9.25
  • Reward: $0.75
  • Risk-Reward Ratio: 1:3

Moderate Long Position

  • Entry: $9.25
  • Stop-Loss: $8.75
  • Risk: $0.50
  • Target: $13.25
  • Reward: $4
  • Risk-Reward Ratio: 1:8

Disclaimer: The author currently does not own any of the securities mentioned in this article.

Chart Of The Day: Natural Gas To $13.25
 

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Chart Of The Day: Natural Gas To $13.25

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Comments (20)
Phyo Phyo
Phyo Phyo Sep 13, 2022 11:01AM ET
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hi everyone money and that
Kashyap Patawari
Kashyap Patawari Aug 30, 2022 3:44PM ET
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What’s your review again . IAm holding at 9.25
Ralph Merry
Buzzed Aug 25, 2022 9:42AM ET
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a non-technical item I'd like to mention is the failure that LNG plant in Freeport Texas. taking that offline is created a minor glut in natural gas right now in the United States. the last I checked that plant goes back online in November meeting or gas will be exported to Europe or wherever moving some part of thes right before we go into storage withdrawal for winter.thank you for your article.
Dima Yush
Dima Yush Aug 24, 2022 12:55PM ET
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Cant take you seriously after this article and suggesting 13.25 target. 20 million Americans are behind on payments for electricity as it is. NG powers 40% of the grid. suggesting it will get 40% worse means millions of bankrupt individuals and companies. you are a criminal sir
Phong Nguyen
Phong Nguyen Aug 24, 2022 12:55PM ET
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@Dima Yush: Well said !!!
Chris Tsagalidis
Chris Tsagalidis Aug 24, 2022 12:55PM ET
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he s a criminal for making a forecast?  or cause you do not like what he is saying? i dont know whether gas will go to 13.25 or not, but bankrupties are definately coming. besides, werent the us citizens celebrating when they were getting free money for doing f@ck all due to a lockdown cause of a stronger than usual flu? whoever thought that the bill wouldnt come should think again! And whoever thinks that the FED didnt know the ending of those crazy and unnecessary stimulus packages is just naive. Did you really expect something different after 6+ trillion USD in 18 months?
Dima Yush
Dima Yush Aug 24, 2022 12:55PM ET
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Chris Tsagalidis   IMO anyone spreading poison is a criminal..sorry if my opinion hurts you
Phong Nguyen
Phong Nguyen Aug 24, 2022 9:28AM ET
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Cant help but still having to laugh at your loud bleating of 13.25 for NG to the naive sheep. Totally BS !!!
Aung Naing Tun
Aung Naing Tun Aug 24, 2022 8:38AM ET
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hi fri
Mohan Thiru
Mohan Thiru Aug 24, 2022 12:34AM ET
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Really impressive analysis
Mohan Thiru
Mohan Thiru Aug 24, 2022 12:34AM ET
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really impressive analysis
Mohan Thiru
Mohan Thiru Aug 24, 2022 12:34AM ET
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really impressive analysis
Dustin Yunees
Dustin Yunees Aug 23, 2022 3:14PM ET
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Interesting analysis. You will surely have a lot of this knowledge and experience. However, they don't seem to be very helpful in predicting the future. I read your past analysis and thought so. It seems that the future is not the realm of humans. https://www.investing.com/analysis/chart-of-the-day-a-contrarian-approach-to-trading-natural-gas-200627704
Pinchas Cohen
Pinchas Cohen Aug 23, 2022 3:14PM ET
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