Nat Gas: Been there, done that!

I’m always looking for input from you, the “Good Readership”, to guide me on topics you’d like to see covered on this blog. I prefer not to cover individual stocks unless they are big movers like Valeant was last year – and widely held “significant” issue like Apple. I am very happy to address a sector, a commodity, a country index, a security type (such as preferred shares which I addressed a few months ago on a reader request) or an ETF that you follow which might have some appeal to the broad audience that reads this blog. Case in point – a reader recently asked me to cover my thoughts on Nat Gas from a technical perspective. His wish is my command.

Below is a chart of Nat Gas that I keep on my “Saved Charts” collection in my stockcharts.com file. I’d encourage readers to keep their old charts if only to be able to look back at your old notations and see how accurate your analysis has been. I’ve been doing this for a long, long time…and I can attest that my successful approach to trading has been a result of ongoing study and learning – from others AND my own past trading decisions. This is why you will often see the same charts – updated of course – on this blog. I follow my past work, updating new patterns, but also displaying my past trendline and formation observations. In this way, you can see both current and past observations—be they right or wrong. It’s a principal I’ve maintained on our ValueTrend website – we display and disclose our ongoing performance numbers – which hopefully continue outperforming the market, but at times, may sling some mud on our faces. But it’s all part of our commitment to full transparency.

Nat Gas looks to have formed a “Head & Shoulders Bottom” of late. It’s done this before, as you can see by my past notations of that same formation in 2012. A perfect H&S bottom will decline in volume as the formation occurs, and then will ramp up in volume when the breakout occurs. It’s ideal if you get a neckline test. It did test the neckline in 2012, and looks to be doing the same right now. Been there, done that – as they say.

According to the Thackray’s Guides, and EquityClock (chart above), Nat Gas has 2 seasonal periods to look for – I’ve marked them on the EquityClock chart. The first is March to June, followed by another period of strength from September to late December. In between those periods, the commodity can be a bit weak. It would seem that the seasonals are working quite well this year, having seen the rally occur precisely from March until June, followed by the pullback to the neckline – coincidentally occurring between June to recently. The exact same pattern and seasonal timing occurred in 2012 when it staged its last H&S bottom. Hey—this seasonal stuff really seems to work! If seasonals play out in conjunction with this chart formation, Nat Gas could be a “buy” candidate by the end of this month or very early September.