It's Natty Season

With fall approaching us, things are beginning to change.

The weather is perfect for golfing, the Kansas City Chiefs are back to dominating the NFL, and it's the best time of the year for Natural Gas futures.

In July, we outlined asymmetric risk/reward setups in Natural Gas futures and 4 natural gas stocks.

As we expected, it has taken some time for these setups to come to fruition. 

However, the cleanest fossil fuel has carved out a textbook reversal pattern and looks poised to blast off any day now.

Here's the average monthly performance for Natural Gas futures over the past 3 decades:

Natural Gas has a tendency to rally in the fall as September and October are the two best months of the year.

The longer-term structure is also shaping up quite nicely:

Historically, we've seen demand for methane step in at this level time and again.

But these bottoms have been messy...

So instead of getting chopped up in a range, we like the monthly MACD as a mechanism for timing our entry.

This long-term momentum indicator has been negative since late 2022, and is just now flashing a buy signal.

With the bias shifting higher over longer timeframes, let's discuss how we want to trade Natural Gas futures over shorter timeframes:

From the June peak, natty gas corrected about 40% before bottoming in early August.

Since then, it has carved out a textbook reversal pattern and is now pressing against the upper bounds of that range.

The VWAP anchored to the June high is our line in the sand.

We want to buy Natural Gas futures on strength above 2.33, with a target of 3.15. That's over 35% upside, and it could happen fast.

COT Heatmap Highlights

• Commercial hedgers added over 135,000 contracts to their largest US 10Y T-Note net-long position in history.
• Commercials added over 6,000 contracts to their Natural Gas net-long position.
• Commercial hedgers are continuing to unwind their largest Canadian Dollar net-long position ever.

Click here to download the All Star Charts COT Heatmap.

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