Jeff Clark's Market Minute

This Commodity Looks Set to Pop Higher

Natural gas has been the most volatile commodity over the past four months.

The price of natural gas was $3.20 per million British Thermal Unit (MBTU) last November. It rallied all the way to $4.80 in just a couple of weeks as the market discounted the vicious cold spell that was headed our way this winter.

At $4.80 per MBTU, the price was overstretched to the upside. The move was unsustainable. And the proverbial rubber band was set up to snap back.

That’s exactly what happened.

The price of natural gas has plummeted to just $2.62. That’s a 45% drop in a little over two months.

Now, though, we have the opposite condition…

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The natural gas “rubber band” is overstretched to the downside. And, it sure looks to me like we have the potential for a quick, snap-back rally.

Take a look at this chart…

Natural gas is now trading at its lowest price in a year. The price is far below its various moving averages. And there’s positive divergence on the MACD and CCI momentum indicators.

Positive divergence occurs when the price of an asset makes a lower low, but the momentum indicators form higher lows. It signals that the momentum of the current trend is weakening. And, if often occurs just before the price of an asset reverses trend.

So… I like the odds of a rally in the price of natural gas over the next few weeks. Even a modest “snap-back” rally up to its 50-day moving average line (about $3.20) would be a 20% gain from the current price.

That sort of potential gain is worth trading.

Best regards and good trading,

Jeff Clark

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Great sessions so far and I’m finding good profits. Thirteen winners and 6 losers since I started doing your approach on my own, from January 23 to yesterday. Enjoying the winners, and even the losers are a great learning experience!

– Mike

And a Delta Report subscriber talks about the end of the bull market…

I have searched for someone that could provide some warning about when this bull market would end. I really do believe you are the guy… Maybe the sick feeling I have is a signal it’s over.

– Shawn

How do you trade commodities? Do you see natural gas popping higher?

And as always, send any other trading questions, suggestions, or stories to [email protected].

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