Natural Gas futures on the NYMEX rallied during the week closing 9% higher than the previous one at $4.02. EIA confirmed on Thursday a build of 49 Bcf in working underground stocks for the week ended July 16. Inventory is currently at 2,678 Bcf, 16.6% lower y/y, 6.2% below the 5-year average. Both percentages have just started looking steady in the middle of the refill season.
The heatwave is driving the price higher, we have already reached the $4.00 mark we had wanted to see for the Autumn contracts back in June. We have reached it already for September. We have only recently changed direction on seasonality and any positive spike was more than welcome while buying the uptrend.
Here is where directional trading becomes tricky. January contract has been looking steady for months, currently trading at $4.20 on decent volumes for this time of year. We have to consider all Dog Days demand and pricing as a nice benchmark for the winter contracts when demand is doubling. But is it still cheap to buy?
It is not. And rigs are keep on coming online after last year's consolidation. So we need to start selling the near term charts as an aggressive exhaustion is very likely to happen on hedging activity, then we will buy the same ranges again until a seasonal ceiling is going to be reached around $4.50 on end-of-year trading. I feel really snob about anything above this price.
Fundamentals have to be taken into account. We do not want to become too greedy about this trading idea which has already offered us more than 30% in real-time trading. We are going to let the market decide for us again later in September.
U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas. 