Natural Gas
Thursday, October 16th, 2008

The energy sector has been under pressure since crude hit a high near the $147 mark. The Dow Jones Energy Index is down nearly 50% from the high in May. 30% of that decline has come since September. As a result the oil services, alternative energy, coal and natural gas have all fallen as well. Below is a chart of natural gas which shows a similar decline starting in July. The initial decent was almost vertical on the chart and has slowed since. The current level of support is $29.20 and the question remains as to whether we will hold this level or not.

The price of natural gas has started to stabilize and we are heading into the winter months which could reinforce the stable prices or increase demand and price.



The break below $33 puts natural gas at new lows and in uncharted territory. Money flow remains on the decline along with momentum. This brings into question why bother to play natural gas? The oversold state of the sector creates the potential of a snap back on any momentum in the sector. The evidence of this was earlier this week when crude moved up $5 per barrel, natural gas move up $1.50. Keeping this on your watch list and look for a move above the $31.20 mark initially. The target would be an initial move to the $36 mark and then $40 from there. The down trendline will come into play near the $33 mark currently. A break of the downtrend line would be bullish short term. Watch the money flow for as an indicator of interest.

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