On June 14, 2012 I had issued a buy rating on natural gas and personally decided to go long natural gas using the ETF United States Natural Gas (NYSEARCA:UNG). I have since sold portions of my holdings as well as adding to my position at various points. I have been asked by numerous individuals if I would publish my recommendations on these trades via seekingalpha.com. That is what I am doing today and am changing my rating to neutral.
The day I issued the buy rating natural gas closed at $3.36 BTU. I felt in the long run demand would increase therefore increasing price and that the sell off of natural gas provided a great entry point. At the time I believed natural gas should have been between $4.00 and $5.00 BTU. I viewed this as a low risk vs. high reward opportunity relative to other risk/return tradeoffs in the market. Today (4/18/2013) a new report was issued causing the price of natural gas to rise. Natural gas closed at $4.40 BTU. This increase has been attributed to two main features of the report. Supply rose but less than analyst expectations and supply is still below the five year average. Although I believe natural gas still has some upside, the risk vs. reward characteristics have changed. At these levels I believe other opportunities in the market are more attractive especially as we head through earnings season. As of today, 4/18/2013, I have sold all of my shares of UNG for an average price of $22.81 in which I had an average purchase price of $16.94.
I have been asked by individuals on this site when I believe would be a good entry point for natural gas. I will continue to watch each day and will be looking to buy again if the price drops below $4.00 BTU and plan on entering this trade via UNG. Depending on the market dynamics and future reports I may enter this trade simply by going long or by placing various option trades. I will publish details if the opportunity presents itself.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.