The natural gas markets are seemingly well supported in the early hours of Thursday, as we are still perhaps pricing in the idea of the heat in the South at the moment.
The natural gas markets continue to show a lot of noise out there, and we do continue to see buyers coming in on dips. The last two weeks have been about a certain amount of recovery. And I think at this point, we might be trying to get to the $2.50 level. When I zoom out on the chart, the first thing that I notice is that if you buy dips and hang on to them long enough, you make money. That is the cyclical trade. The only way to do that is with a lack of leverage.
You obviously cannot over lever your position and then hope that it doesn’t drop 20 cents against you, thereby wiping out your entire account. This is a cyclical trade, and we are focusing, like I said, possibly on heat in the South, but this is a short-term thing. The real move comes later in the year when we start talking about heating places like Boston, Philadelphia, Pittsburgh, New York, Columbus, Wheeling, places like that, that are going to demand quite a bit of natural gas.
So, with this, I think on dips I will continue to add to my ETF position, but if you don’t have the ability to buy an ETF, that’s fine, use the CFD markets, but use them wisely. This is not a market where you want to get over levered and press buttons like a video game.
If you have questions about whether or not the validity of the cyclical trade is true. All you have to do is look back multiple years and you will notice somewhere in fall, we get a big spike. My job is to simply dump off the positions later, collect a few percent for my portfolio for the year. And basically, I typically ignore natural gas for several months after that.
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Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.