Thursday, March 14, 2013

Natural Gas – Inverse H &S

A lot of North American natural gas producers had a pop last week and we wondered if the advance just a sucker rally or, are we into the early stages of a new bull market in the natural gas complex?

Our weekly plot of a continual the natural gas (NYMEX) futures contract displays an inverse Head & Shoulders (H&S) pattern along with a relative perform spread vs. the price of crude. It is important to see there are two unrelated studies displaying bullish signals for natural gas  

Just to review some inverse H&S rules

1) The left shoulder (LS) is usually larger in time than the right shoulder (RS)
2) The LS usually is accompanied by higher volume (not shown) than the RS
3) When drawing the neckline always extend it to (2)
4) The initial neckline breakout is measured from the lower RS to the peak at (1)
5) The price will usually decline from (1) back to (2) or support at the neck line.
6) The major move is measured below and above the neckline from the low of the head (H) to the peak at (3)
7) Finally – the bigger the pattern in time the better – this one spans over 6-months.

Next post we look at the ways to enjoy the new natural gas bull and perhaps we can repeat the success we had with the lumber space several months ago    


Piazzi said...

why not FCG?

it's been doin OK said...

For Anonymous: Yes we need US and CDN Barrick above $31.50 to get a positive turn on the gold miners – the junior producers are looking better. On money flow I use a blend of OBV and Accumulative Distribution and only act if they trend together – if they diverge it is a false move

For Yogi: I do study the NASDAQ Comp and the NASDAQ equal weight and find no good divergence signals – the Apple mess has some impact – but not material

For dh12: Yes I see the Transports breaking to the upside with the Industrials – the only problem now is the transports are trading more like the industrials and the divergence study is lost for now. That natural gas bottom is an inverse head & shoulders pattern

For Edmagee: Again that natural gas bottom is an inverse head & shoulders pattern and traders could use the HNU or just buy selected natural gas producers and don’t forget the BMO ZJN

For Piazzi: Yes the FCG is OK for U.S. $ accounts

Thanks to all: Bill Carrigan

Piazzi said...


the volume on ZJG is very lean. isn't that a concern? said...

Hello Piazzi

The BMO ZJG is an open ended trust and so there is always a bid or offer close to the value of the basket of stocks held in the ETF

Liquidity is not a problem

Bill C