Natural gas futures have fallen by more than 30% year-to-date. Can the futures contract bounce off a historic support level, or are we facing liquidation risk?
Recent Developments:
As the western hemisphere had one of the warmest winters on record, the demand for natural gas had fallen precipitously. The recent export ban on natural gas producers, as well as stricter flaring regulations, has increased supply to an unsustainable level, and many are wondering if the commodity can go negative.
Positioning of Managed Money:
It would seem as though the downside risk is limited. As of February 13, 2024, managed money (CTAs and Hedge Funds) is now sitting at a net long position of +368,000 futures and options contracts, betting that the bottom is in. This is also toward the higher end of the range, going back to January 2020, when MM was net long +371k, and close to the April 2012 net long level of +391k.
Technicals:
The identified support range is $1.40-$1.50 on the front month futures contract. A break and close below this level could lead to long liquidation, pushing prices closer to $1.00. If we manage to stay above this support pocket, a break and close above $2.00 would be encouraging.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Recent Developments:
As the western hemisphere had one of the warmest winters on record, the demand for natural gas had fallen precipitously. The recent export ban on natural gas producers, as well as stricter flaring regulations, has increased supply to an unsustainable level, and many are wondering if the commodity can go negative.
Positioning of Managed Money:
It would seem as though the downside risk is limited. As of February 13, 2024, managed money (CTAs and Hedge Funds) is now sitting at a net long position of +368,000 futures and options contracts, betting that the bottom is in. This is also toward the higher end of the range, going back to January 2020, when MM was net long +371k, and close to the April 2012 net long level of +391k.
Technicals:
The identified support range is $1.40-$1.50 on the front month futures contract. A break and close below this level could lead to long liquidation, pushing prices closer to $1.00. If we manage to stay above this support pocket, a break and close above $2.00 would be encouraging.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.