Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

WTI Crude And Natural Gas: Traders Need To Avoid Trading On Emotions

Published 09/10/2022, 03:02 AM
Updated 07/09/2023, 06:31 AM

Being an energy analyst, I feel that there is nothing like bulls and bears in the world of trading. Only emotions make the same human behave like a bull or a bear.

Despite repeated losses, emotions cap the ability to think logically about defying fundamental realities or the cause behind a sudden false breakout. No doubt that a sudden surge could be the immediate reaction to the news flow that proves to be short-lived.

In reality, a trader who trades natural gas, a highly liquid commodity, changes his side all of a sudden and turns into a bear as the emotions again compel him to start selling profusely.

This sudden behavioral change results in repeated losses as some deep pocket Hedge Funds take all the gains due to the sudden changes in mass behavior.

The current uptrend has turned into a steep slide since Aug. 30, but most traders are emotionally attached with bullish sentiments as they still dream about the new peak tested by the natural gas futures at $11 or $12.

On the other hand, deep-pocket Hedge Funds entered the scenario with the Russian invasion of Ukraine on Feb. 24, 2022, while the natural gas futures were trading at $4.676 on Feb.23, 2022.

The natural gas futures had tested a high at $5.576 on Feb. 2 and a low at $3.884 on Feb. 11 before this unexpected event.

The natural gas futures continued to trade in a narrow range between Feb. 12 to Mar. 21, well below the stiff resistance at $4.929, before finding a breakout on Mar. 22.

Most natural gas traders were full of bearish emotions. Moreover, most bearish traders criticized the analysts who tried to unearth the advent of an uptrend.Natural gas futures daily chart.

I had opined that this was an advance indicator of the advent of an uptrend in natural gas futures as the geo-political moves and the technical formation in daily charts were evidence of an uptrend.

The natural gas futures witnessed some selling spree in-between this uptrend till they hit the first seasonal peak at $9.665 on June 8, 2022.

Natural gas traders felt this storage phobia hover over the natural gas price movements during the whole month of August and September.

This is what I had predicted well in advance. Still, most traders were emotionally involved with the bullish sentiments created by some deep pocket Hedge Funds, which defied all prevailing fundamentals.WTI Crude Oil Futures Daily Chart.

I had also written about what was an advance indicator of a sharp slide WTI Crude Oil price. The WTI Crude Oil Futures witnessed a sharp selling spree after hitting a peak at $130.50 on Mar. 7, 2022, and a low at $81.20 on Sept. 8, 2022.

Russia’s announcement to shut Nord Stream 1 pipeline for an undisclosed period as it found leaks during maintenance on Aug. 29, 2022, has added one more leg to this issue: the supply shortage of the major energy components.

Once again, I warned about the downward trend in the WTI Crude oil and natural gas prices while writing an analysis on Jun. 13, 2022, which fetched a lot of attention from the alert readers.

Oil prices rose Friday, helped by weakness in the U.S. dollar, but are still on course for their lowest weekly close in seven months on concerns of sluggish economic growth and China’s COVID woes weighing on global demand.

Finally, I conclude that the energy price scenario for the bulls could turn uglier if they remain stuck with bullish emotions instead of digesting the latest developments on the international front, as the G7 nations have agreed on Friday to cap Russian oil prices.

Disclaimer: The author of this analysis does not have any position in natural gas futures. Readers are advised to take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world. Remember, YOU push the buy button and the sell button. Investors are constantly reminded that before making any investment, you should do your proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from an investment and tax professional before making any investment decisions. Any material in this article should be considered general information and not relied on as a formal investment recommendation.

Latest comments

sir aap kyo fake news dete ho ur anaylisis is total rubbish
it's like people think price caps are going to work for the first time in the history of the world lol.
The problem, Satendra is you are reporting philosophically. not people who push natty around on the ground real time.
not talking* to
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.