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Update On Natural Gas, Crude Oil & Gold

Mar. 20, 2015 11:51 AM ET9 Comments
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This is an update on my last article written on March 14th found here. In that article I mentioned how there were exciting trading prospects in three particular markets and I was sure correct. It has been exciting and we have hardly gotten started. I will cover each market now, starting with natural gas.

Natural Gas Is Working On Forming A Short Term Top

The above chart is the daily chart of April Natural Gas, updated through the present time when I am writing this article. In my last article, I was calling for a March 19th top. Well, we did indeed rally into Thursday, but the actual high came on Wednesday at $2.935. On Thursday with the inventory report coming out, it was mostly a downer. However, today, Friday, we are rallying back towards $2.90. I am still looking for a high into the current time frame in natural gas, but feel that natural gas, crude oil and gold are all somewhat tied together as they all jockey against the action of the U.S. Dollar. Natural gas is popping today along with crude oil and since crude oil could snap back a bit further off the low, I cannot rule out a further rally in natural gas, towards the $3.00 to $3.10 level. I am still looking for a top in the next couple days in any regards, and am then looking for a 4 week selloff to test the old lows and possibly make a marginal new low.

April Crude Oil Stopped Dropping When It Hit $42.03

In my last article, I mentioned that if you were less anxious to get long April Crude Oil (which turned out to really be catching the proverbial falling knife) to wait to buy the energy ETFs when April Crude Oil hit $40 to $42. Well, we stopped at $42.03, missing the top of my target range by just 3 cents. We then rallied on the Wednesday Fed announcement, consolidated lower yesterday, and today we rallied back up quite nicely, taking out Wednesday's high in the process. Here is a daily chart of April Crude Oil which is current to the time I am writing this article:

I just saw a headline where Dennis Gartman is calling for $10 crude oil. Well, he might eventually be right but I seriously doubt it. In the short term however, we are now looking like we are trying to form a short term bottom and could easily rally back to the $48 to $50 area if not higher. Don't listen to the hype, just follow the chart action. Watch the news on CNBC but have the volume muted. Follow the price action as the price action is the real "tell". What I see from the charts, makes me quite confident in repeating that $40 to $42 is strong support in April Crude Oil, and as we move forward trading May Crude Oil etc., we should continue to hold support there. If the $40 price level is broken, do not bet on a move under $35 and we may not take out $37 on the low end. Regarding the bearish fundamentals, the "market" already knows all about that and is pricing in all that bad news. We won't run out of storage room and at some point the supply/demand imbalance will even out on its own, thanks to these low prices. If you wait until the fundamental picture improves to buy, you will have missed the bottom and will be buying at much higher prices with risk of getting caught in a pullback. I repeat my suggestion that at $45 and lower in April Crude Oil, it is a great spot to be buying Crude Oil as well as the energy ETFs. Now we can turn to my favorite: gold!

The Fed Induced Gold Rally Could Take Gold To $1200 to $1220

The above April Gold Chart includes the current price action up to the time I am writing this article. After we got the pop on Wednesday when the Fed appeared quite dovish and pushed back expectations of a rate hike from June to September (or sometime in 2016 LOL), gold surged higher. We were saved from having to drop down into the abyss at $1100 or a bit lower......for now anyway. When we made that surge to $1175.10 on Wednesday, I posted on Stocktalk that we should correct down to the $1155 to $1160 level where one could get long. Well, we dipped on Thursday to $1158.60, and I was able to buy several contracts from the $1163s down to the $1159s. I correctly predicted that Thursday would be a consolidation day and that Friday would be a surge higher. Bingo! Higher prices on Friday. A key resistance level previously noted, was $1180 to $1184 in April Crude Oil. Today's high so far is $1183.70 and we are holding now right above $1180. What was a ceiling ($1180) later becomes the floor, as you move up the price elevator towards $1200 to $1220. Yes, we could easily rally that high before rolling over to retest the lows. I am continuing to play the long side as we test the resistance levels of $1184, $1190 to $1194, $1200 and eventually $1220. You can follow me during the day as I make comments on a Stocktalk thread.

Although we are now above $1180 in April Gold and that should now be support, we are still vulnerable for retracements to $1175 and even down to $1170. However, for now the US Dollar had priced in an imminent interest rate increase. Now that the date has apparently been pushed back, thanks to the weakness in the economy and lowering of inflation expectations, the US Dollar needs to adjust to a lower level, allowing for commodities to correct higher, moving off their lows. I am still calling for a commodity bottom in April, but am enjoying the current kickback to the upside. I love it when the bears have to scramble to cover their shorts!

Disclaimer:

The thoughts and opinions in this article, along with all Stocktalk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

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