On April 10 we noted that natural gas could be bottoming. We quoted a colleague (a former trader at Drexel Burhnam), who told us:
"I know that NG looks awful and made fresh 3-year lows today, but at some point I feel that the market is going to find a long term bottom."
Reasons? First, he noted, the trend to higher electricity production at the expense of coal is happening at a rapid pace and is only going to increase. Second, all of the drop in drilling that might show up in oil production in the latter half of the year has an effect on NG, which is a byproduct of shale drilling.
Third the big increase in refining that is starting to occur uses NG.
The export of products is allowed, not crude, so that is a big factor. There are other reasons like lower hydro-electric power, which increases gas power instead.
All of which point to increased use and flat supply.
At the time, Natural Gas was making new, three-year lows at 2.50. Fast-forward to this week: Nat Gas made a new low at 2.44 this past Monday, and has since reversed sharply to 2.79 in what could be a key, upside-reversal week, if today's close is above 2.62.
A weekly-reversal signal usually has serious implications for a change of direction.
If one is confirmed off of this week's low at 2.44, it will have occurred precisely at the symmetrical-price level of the "left shoulder" established in August 2009 at 2.41, which imbues the 2008-2015 time period with powerful, upside potential.