Natural gas: Seasonals point to falls but risk from Russia looms large
Natural Gas has some very strong seasonal falls coming up. Let’s use Seasonax screener function, which automatically generates a list of the most promising investment opportunities, to identify this pattern.
Choose commodities as your sector to search. Let’s search from Feb 02 with the examination period for the past 15 years and the minimum and maximum time period that you want to hold the instrument ranging from 5 to 30 days. We can then sort the list by the biggest falls, thus the best potential selling opportunities are highlighted. And as an optional last step, you could also select the filter that will screen your results and remove all patterns with lower rates of winning trades.
We see that over the last 15 years, Natural Gas has fallen 11 times between Feb 02 and Mar 02 making an average return of 4.66% for sellers.
Now at the moment the fundamentals of cold weather and geopolitical tension between Russia and Ukraine actually mean natural gas prices have good reasons to buck this seasonal trend. However, if tension fade and the weather warms up it can be very helpful to know this strong seasonal pattern is in place.
Major Trade Risks:
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If the weather stays cold natural gas demand will continue.
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If Russia makes an incursion into Ukraine expect Natural Gas prices to spike significantly higher. Be aware of the major risk in shorting natural gas right now.
Author
Giles Coghlan LLB, Lth, MA
Financial Source
Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.
