Dead Cat bounce or foot on the gas?
The price of the Claymore Natural Gas ETF has gone from a high of $20.67 down to $4.03 in the last year. This represents a drop of 81%. Last week there were signs of life. Is this a dead cat bounce or a sign of foot on the gas?
The Claymore Natural Gas Commodity ETF tracks the performance of the benchmark NGX Canadian Natural Gas Index, less fees and expenses. The ETF provides non-leveraged exposure to the Alberta natural gas market, by investing in physical natural gas forward contracts and is not directly involved in the exploration, operation, reserves, engineering and management risks associated with an investment in entities that explore for, produce and sell natural gas. The Claymore Natural Gas Commodity ETF (TSX: GAS) tracks Canadian natural gas prices in Canadian dollars.
Technically there are no signals other than a bounce off the bottom, which occurred last week. The slope looks more like a black diamond run on a ski hill. The current price has maintained it’s stance below the 50, 100 & 200 day moving averages occasionally bouncing off resistance levels at the 50 & 100 day moving averages. The volume of trading has been steadily increasing over the summer, spiking last week. The moving average convergence divergence (MACD) is also looking more positive.
From a seasonal perspective, Natural Gas tends to outperform from August to December based on research by Don Vialoux at http://www.timingthemarket.ca/. Typically, natural gas is used for furnaces and air conditioners in the winter and summer. A number of things can impact price including weather at this time. Most of the increase in price comes from distributors accumulating inventory for the winter months. Traders are also responsible for controlling the moves of natural gas both ways. Dennis Gartman points out that Natural gas is cheap from a historical perspective relative to oil. The ratio of prices between oil and natural gas is 28 to 1 vs. 12 to 1 just a few months ago. I would guess that now would be a good time to bet on natural gas moving off their lows.
The Claymore Natural Gas Commodity ETF tracks the performance of the benchmark NGX Canadian Natural Gas Index, less fees and expenses. The ETF provides non-leveraged exposure to the Alberta natural gas market, by investing in physical natural gas forward contracts and is not directly involved in the exploration, operation, reserves, engineering and management risks associated with an investment in entities that explore for, produce and sell natural gas. The Claymore Natural Gas Commodity ETF (TSX: GAS) tracks Canadian natural gas prices in Canadian dollars.
Technically there are no signals other than a bounce off the bottom, which occurred last week. The slope looks more like a black diamond run on a ski hill. The current price has maintained it’s stance below the 50, 100 & 200 day moving averages occasionally bouncing off resistance levels at the 50 & 100 day moving averages. The volume of trading has been steadily increasing over the summer, spiking last week. The moving average convergence divergence (MACD) is also looking more positive.
From a seasonal perspective, Natural Gas tends to outperform from August to December based on research by Don Vialoux at http://www.timingthemarket.ca/. Typically, natural gas is used for furnaces and air conditioners in the winter and summer. A number of things can impact price including weather at this time. Most of the increase in price comes from distributors accumulating inventory for the winter months. Traders are also responsible for controlling the moves of natural gas both ways. Dennis Gartman points out that Natural gas is cheap from a historical perspective relative to oil. The ratio of prices between oil and natural gas is 28 to 1 vs. 12 to 1 just a few months ago. I would guess that now would be a good time to bet on natural gas moving off their lows.
posted by David Allard at
11:42 AM
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