(click image to enlarge)
After much controversy by the naysayers, we got the correction I was calling for. Futures in natural gas were down 50 cents in the last 3 weeks, retracing roughly 15%. As you can see from the chart, we've completed a 50% Fibonacci retracement.
Prices are approaching oversold levels, and we could go either way from here. My suggestion is lighten up on shorts or, at a minimum, tighten stops. Prices above the 8 day MA; the orange line would likely conclude that the correction is over. While a break of the 100 day MA; the light blue line would suggest a trade closer to $2.50 on this contract. I would not be establishing fresh positions in either direction.
For new entries, I would wait for a break above or below the aforementioned MAs. You can see the daily chart above, but take a look at the longer term perspective on the weekly chart. We've closed lower for the last three weeks, and the chart is ugly. A 50% retracement on the weekly chart puts prices another 10% lower from current pricing, so don't think you can buy and fall asleep at the wheel, because we are not out of the woods yet.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.