Very interesting seasonal activity in natgas futures as the market tends to put in important, longer term bottoms in September (see weekly chart below). Looking back over the last 10 years, in 8 cases the market did indeed bottom in September and rally for an extended period of time (in the worst case, the market only rallied for about 2 months). Also note that in the other 2 cases, the market was already in an uptrend and accelerated higher after September. Don’t want to get too much into the “statistics” of the moves because there is too much room for interpretation (picking the peaks, etc.), while the broader move has been higher over the last 10 years. Suffice to say by just looking at the weekly chart below, that the majority of the upside moves have been significant. It’s hard discount that type of consistency and suggests at a minimum, a few months of higher prices ahead.
Nearer term, the market does appear to be bottoming from the Sept 3rd low at $7.30. Though further upside is favored, there is scope for more chopping first. Also, with the market trading just below key resistance at the nearly month long bearish trendline (currently at $8.20/25), don’t see the need to immediately buy right here. Instead, would wait for a break above that trendline to buy. May have to pay slightly higher prices but a break above would greatly increase the likelihood that a potentially important bottom is in place (better risk/reward). Note too, would buy on an intraday break above the trendline (versus waiting for a close above), as it could trigger a further upside acceleration and don’t want to be buying at significantly higher prices if that does indeed occur. Resistance above there is seen at $8.80 (Aug 28th high) and $9.58 (38% retracement from the July high at $13.69) while nearby support is seen at $74.50.
