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<\/p>\nThe price of natural gas almost always blasts higher at some point during the fourth quarter of the year. <\/p>\n
That makes sense. Temperatures fall. People use natural gas to heat their homes. And, the price of natural gas goes up because of the increased demand.<\/p>\n
So, buying natural gas as we head into winter seems like an easy, no-brainer strategy.<\/p>\n
But, as anyone who has been around the financial markets for more than a week can tell you, there is no such thing as an easy, no-brainer strategy.<\/p>\n
The problem is that it’s hard to get the timing right on a natural gas rally.<\/p>\n
For example, back in 2016, the price of natural gas fell 20% in October before it reversed and rallied 40% into the end of the year. If you were one week too early buying natural gas, you probably would have stopped out of the trade for a loss before the price turned around.<\/p>\n
In 2017, the price of natural gas fell almost 20% between Thanksgiving and Christmas. It recovered that entire loss by New Year’s Eve. And, it rallied another 10% in the first week of 2018.<\/p>\n
Last year, the “traditional” natural gas rally started in late September. And it peaked around Halloween. The price of natural gas jumped more than 60% in just one month. But, if you held onto the trade, looking for bigger gains going into the winter months, then you gave up almost everything from the start of 2019.<\/p>\n
My point is… no matter how “logical” it seems that natural gas prices should rally heading into winter, profiting off of that logic is really hard to do.<\/p>\n
Sometimes though, it makes sense to try anyway. This is one of those times.<\/p>\n
Take a look at this chart of natural gas…<\/p>\n
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Natural gas made a recent bottom around $2.20 a couple of weeks ago. As the price dipped to a lower low, though, several of the technical indicators (like the MACD<\/a>, RSI<\/a>, and CCI<\/a>) at the bottom of the chart made higher lows. This sort of “positive divergence” often marks the end of a decline phase and the beginning of a rally phase.<\/p>\n The price of natural gas then bounced up towards its early October high. It pulled back from that resistance<\/a> level. And, so far at least, the price is holding above the $2.20 low. So, we just might have a “higher low” in place.<\/p>\n This action, along with the positive divergence on the technical indicators, is a bullish<\/a> sign. As long as the price of natural gas doesn’t close below the mid-October low of $2.20 then the path of least resistance is higher.<\/p>\n Natural gas could be sharply higher by the end of the year than where it is today. And, natural gas stocks should be higher as well.<\/p>\n In fact, this is probably my favorite sector heading into the end of the year.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S.<\/strong> I just recommended a natural gas stock to readers of my new service, The<\/em> Breakout Alert<\/em>. It’s a dirt-cheap stock that trades for just two times earnings… And, I expect it could be 100% higher within the next three months.<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
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