Natural Gas Still a No-Conviction trade on buy side. Read when to buy or sell for 4-12% moves

Indian Natural Gas prices, Natural Gas price in India, Natural Gas MCX Trading Calls, Natural Gas tips, Natural Gas MCX Calls

Natural Gas prices on MCX are hovering between 215 and 230 for almost 2.5 months now, after it made a high of 257.10 on 4 September 2013.

Natural Gas enthusiast think natural gas are in for a big ride up. But it is not so convincingly.
Even rupee slide did not helped the natural gas price to go past 260 and reach close to 300.
Tradign speculation at time could do this if the prices sustain above 240 for few weeks, otherwise not.
We recommend to buy and trade but do not hold for beyond breakout gains. Book out around 240.
If you want to ride on then wait for conviction trade on long side above 240 when it once makes new high above 257.10 and then builds base around 240 with time lag. Then and then only we can start building up long position for a target of first 272 and then 300 eventually. We beiliev the run up to 300, if happens as described, should be accompanies by rupee depreciation as well and not just backed by rise in natural gas price in dollar terms.
Having said all of the above, we find better conviction trade on short side. We believe that the prices will collapse below 200 (of course it will take support at 205 levels). We will initiate short trade once natural gas tries to break resistance level around 240 and fails and start falling. We will not wait a bit to short. In that scenario first target will be 215 levels. Then 205 and lower. However, natural gas has been a commodity which remain in a narrow range for a long time and range-expansion (as in Dows Concept of range-expansion and range-contraction) takes less time.
The range-contraction phase does not allow more than 5% return, while range-expansion phase allows 5-35% return and average return of 10% which a positional trade following 'averaging up' or 'inverse pyramiding' technique of trading can reasonable accept.

NATURAL GAS FUTURES: IMMEDIATE, MEDIUM AND LONG TERM OUTLOOK

NATURAL GAS FUTURES: BULLISH IN MEDIUM TERM TO LONG TERM, BEARISH ON IMMEDIATE BASIS

NATURAL GAS IS A STABLE COMMODITY TO TRADE IN COMPARISON. THE MOST STABLE COMMODITY IS NICKEL, FOLLOWED BY COPPER THEN BASE METALS COMMODITIES, THEN CRUDE OIL, AND GOLD AND SILVER AT LAST ON MCX.

HOWEVER, IT GIVES 2-3 MOVES IN A MONTH WHICH ARE ABOUT 5-10% IN 2-3 TRADING DAYS IN A RAW.

THE OUTLOOK FOR NATURAL GAS ON THE IMMEDIATE BASIS IS BEARISH. IT IS TRADING AROUND 221. IT CAN GO DOWN TO TEST 205 LEVELS. DO NOT EXPECT IT TO BREAK 200. EVEN IF IT BREAKS THEN ALSO IT WILL LIKELY BOUNCE BACK RAPIDLY.

IT WAS A VERY GOOD LEVEL TO SHORT ABOVE 230 ON WHICH IT WAS TRADING FOR LAST FEW TRADING SESSIONS.

HOWEVER, RISK TAKERS CAN STILL SHORT AROUND CURRENT LEVELS OR PATIENCE TRADERS CAN WAIT FOR IT TO AGAIN COME AROUND 230 LEVELS.

THIS IS TYPICALLY NOT A COMMODITY THAT YOU CAN CORRELATE OR TRACK VIS-A-VIS THE DOLLAR INDEX, THE RUPEE MOVE AGAINST DOLLAR AND EVEN TRY TO CORRELATE WITH CRUDE OIL.

THIS IS A COMMODITY WITH HIGHLY COMPLICATED AND UNCERTAIN PRESENT GLOBAL FUNDAMENTAL SET UP.

THIS COMMODITY IS NOT LIKELY TO GIVE BREAK OUT EASILY FOR FORMATION OF NEW RANGES. IT IS EASIER TO TRADE NEAR THE LOW AND HIGH ENDS AND TOUGH IN BETWEEN.

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Volatility Measures suggests Spikes in NG while Steadiness in Crude Oil:

Crude oil volatility fell to the lowest level in almost three years. The reasons are stated such as brimming stockpiles and rising OPEC investment in production capacity which expectedly eased concern of shortages. This measure of Volatile in crude oil is oil’s 50-day historic volatility. It has declined to 23 percent presently. This is the lowest mark since July 2007. This measure peaked to 108 percent in the beginning of 2009 when the crude oil prices tanked due to subprime led crisis and Lehman brothers fall. Recently the OPEC countries (Organization of Petroleum Exporting Countries) said they are planning 140 oil projects over the next five years and that its 6 million barrels a da of unused production is enough to meet demand.

If we look at the inventory situation then the US crude stock pile rose to 356 million barrel recently which is biggest since June. Even the inventories held on ships are climbing. However recently the crude oil prices are making fresh yr tops and not receding as should be suggested by the above facts. While it is also a fact that declining crude oil volatility means lower margins from trading operations for global oil giants.

The crude toped all-time high of 147 in July 2008 and made low of $32 in December 2008.

However we at MEGHA INVESTMENTS AND RESEARCH believe that the prices of crude oil should continue to strengthen further despite declining VIX in crude oil however the trade range is likely to remain narrow. The arguments of newspapers and reporters are self-appraising and oversimplifications. There is no proof that the Greece crisis bring crude oil price down. The dollar is strengthen against euro then why the gold prices continue to remain firm? Anyway, reporters have to report and to report (they) have to over simplify, correlate, show reasons, cause-effect relationships, explanations and so on.

The decline in volatile is many times an occurrence of increased liquidity and trading volume which is common across all asset classes. But however we don’t completely agree with this maxim. Many times we have witnessed rise in volatility with rising volumes. The new highs and lows are also typically recorded with record volumes.

While looking at the natural gas, the volatility is rising. The measure increased to 41.7 percent which was at 35.3 percent in march which was 8 month low.