The typical summertime rally in natural gas didn’t happen this year.
Natural gas closed at $2.27 on Wednesday. That’s the same price at which it was trading in mid-May. So, many of my trader friends are moving on. They’re pulling their money out of the “widow maker” trade and heading off to other sectors that have a stronger tendency to rally in the final months of the year.
But, not me. I’m sticking with natural gas – because the setup looks quite bullish.
Regular readers may recall, I bought natural gas in mid-July – noting that it’s called the “widow maker” because the price action is erratic and doesn’t seem to conform to any rules of fundamental or technical analysis.
Natural gas is trading about 10% higher from where I bought it – which is a respectable gain for less than two months.
But, it looks to me like it’s headed much higher.
Take a look at this chart…
Natural gas has been quietly rallying over the past few weeks. It is now trading above all of its various moving averages (the squiggly, multicolored lines on the chart).
And, those moving averages are now coiled together – which should provide the energy to fuel a large move in one direction or the other over the next few weeks.
The chart itself has morphed into an ascending triangle formation. This is a bullish pattern that develops as an asset makes a series of higher lows while rallying and bumping into the same resistance level multiple times.
Eventually, that resistance breaks and the asset moves higher.
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If that happens with natural gas, then the minimum target for this pattern is near $2.60. That would be better than a 10% gain from the current price. And, since the chart is approaching the apex of the ascending triangle, that rally should start soon.
Nothing is guaranteed, of course. We’re talking about natural gas – which has earned its reputation as the widow maker.
But, this setup looks bullish to me, so I’m sticking with the trade.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
P.S. There are a lot of setups coming together, especially in an election year. You can get access to more of them right here.