It’s time to bail on the widow maker.
Regular readers may recall that I bought natural gas in mid-July. I noted that it’s called the “widow maker” because it’s notoriously difficult to trade.
And even though we didn’t see the typical summertime rally I anticipated, I stuck with the trade and reiterated my bullish stance two weeks ago.
The setup in natural gas looked bullish to me. It looked like the widow maker could gain 10% or more – fast.
Here’s what has happened…
The dashed red lines on the chart show the “ascending triangle” pattern that had me leaning bullish, and the upside target of that pattern.
Natural gas has exceeded my upside target. It’s trading 40% higher than where it was in July. It’s up 25% in just the past two weeks. And it’s time to take profits on the trade.
Of course, plenty of traders will argue with me on this. They’ll say, “Let it run. Natural gas is blasting higher. The next obvious resistance is the June high near $3.20. And we’re heading into autumn and winter, when the demand for natural gas is likely to increase.”
I can’t argue with any of that, except to say… natural gas is called the “widow maker” for a reason.
It’s hard to trade. The price action is erratic. It doesn’t seem to conform to any rules of fundamental or technical analysis.
So trading natural gas often feels like fending off death.
|
Free Trading Resources Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
If you can somehow make a profit in that situation, it’s probably a good idea to take the gain while you still have it.
I’m out of the natural gas trade for now. Any traders who followed me into this position should consider following me on the way out as well.
We’ll move to the sidelines and wait for the widow maker to set up again.
Best regards and good trading,
Jeff Clark
Editor, Market Minute