Natural gas prices have started to ramp up on what I think should be the beginning of the next up leg. In March futures as seen in the chart above prices have moved nearly 20 cents after setting an interim bottom 1 week ago. As of this post prices are flirting with the 50 day MA; identified by the green line and within a few pennies of the 38.2% Fibonacci level.?
I have advised clients to scale into bullish trade looking out to May and June contracts. Those wanting a bit of a cushion could opt to sell out of the money call options 1:1. On a move higher you should make more in your futures leg than you lose on your options leg. As for upside targets on the trade use the Fibonacci levels to structure an objective.
I recognize inventories are extremely high and we may continue to see injections but the reality is the market knows this as well and my take is much of this is priced in. On further cold weather, declines on supply or even smaller injections than previously factored in we should get moderate appreciation. No I?m not calling for a return to $5-7 but certainly I think we have the potential to see a $4 trade in my opinion.