As if UNG and natural gas hadn’t already made a splash with their 15% performance last week, the fossil fuel was at it again today. Natural gas futures jumped by about 7.3% on the day, while UNG gained around 6.6%, much to the delight of a number of investors. After slumping for longer than anyone cares to remember, it seems like natural gas is fighting its way to higher prices, however volatile that path may be. Last week’s gains were due to lower stockpiles than expected, but today’s massive jump comes for an entirely different reason [see also 25 Ways To Invest In Natural Gas].
NG futures soared today as “traders weighed volatile near-term weather forecasts and attempted to gauge whether the sharp rally last week will hold until the next set of inventory data” writes Jerry A. Dicolo. NG movements are largely based on the forecast for the next few weeks, so when traders see a heatwave coming and a potential demand spike, they move swiftly to take advantage. It should also be noted that with temperatures around the country heating up, natural gas has the potential for another big day on Thursday if supplies come in lower for a second straight week. One question investors need to ask themselves is whether or not this is signaling a long term trend, or if NG’s jumps are only temporary, as the answer will dictate trading [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].
The above chart shows natural gas over the past week, with two notable spikes sparking from favorable news. For those active traders looking for a juicy opportunity, today’s gains offer a compelling investment. After lasts week’s big gain UNG and NG both had a nice correction the following day, and tomorrow should be no different. While it is possible for these assets to continue to climb, a big session like today is typically followed by profit-taking and a general selling theme. Trade accordingly [see also The Ultimate Guide To Natural Gas Investing].
Disclosure: No positions at time of writing.