Trading the trend: short US natural gas
US natural gas prices have been falling since November but saw a corrective move higher since mid-December which we believe is in the process of coming to an end.
We would thus like to go short front month US natural gas futures and do so with a stop loss at 2.80 and a downside target at 2.11.
(AI Video Transcript)
Natural gas prices analysis
The topic of the first "Trading the trend" video of 2024 is about natural gas prices, and host Axel Rudolph explains that the price of natural gas has been decreasing since November of last year. He uses a term called "downtrend" to describe this downward movement.
Rudolph notices three waves of decline, followed by a small upward movement, which he calls a "corrective move." He believes that this upward correction is going to slow down and hit a hurdle known as the "200-day moving average," which is represented by a red line. Once this happens, Rudolph thinks that the price of natural gas will continue its downward trend and possibly drop even lower than it did in December.
Short natural gas futures
Using technical analysis, Rudolph suggests a trading strategy. He wants to short natural gas futures, which basically means he expects the price to go down. He plans to enter the trade at the current price and set a goal for it to drop to a range of prices where it hit lows between February and June of the previous year.
To minimise any potential losses, he advises placing a stop loss level at 2.80. This means that if the price of natural gas goes above that level, he would close the trade to avoid losing too much money. He emphasises his target level of around 2.11, which is where he expects the price to drop to in this short trade.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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