Last week we commented on the EAI Natural Gas Inventories. This report usually comes out on Thursday, however this week it was released on Wednesday due to a holiday in the USA tomorrow. Also the usual time of 3:30pm GMT (10:30am EST) was moved to 5pm GMT (12 noon EST) so the report would not come in at the same time as the DOE numbers. This release the number came out a bit lower than expected...less Natural Gas Inventories mean higher prices. The estimates given at TradeTheNews is usually a range, however the FastEconomicNews provides a median value which was given at 24 in the Secret News Weapon autoclick software. Using the FastEconomicNews as the primary estimate, this produced a -5 deviation, and we saw a decent spike from this. In the past a deviation of 7-10 was required to safely trade this spike, however at times this news can be much more sensitive and it has moved on deviations of just 1 or 2.
*EIA NATURAL GAS INVENTORIES: +19 BCF VS. +20 TO +25 BCF ESTIMATE RANGE
- US Nat Gas inventories hit all time high of 3.840Tcf.
Unfortunately due to technical issues today the news spike trade using the autoclick software was not possible, however as soon as the initial spike was rendered a fibonacci was draw over it. We can see that price came down to the 61% and seemed to move off it, but then continued down to the 78% where it bounced. This is where the trade entry can be seen on the chart. Price moves very quickly and if the trader waits for some confirmation they will have to chase after the ideal entry price has already printed and passed. As soon as the front-month Natural Gas future contract was bought, it again turned and came back to the 78%, putting the trade into -12 ticks in the red, and this continued for at least half a minute under some bid tone came back into the market and drove prices up. Surely most traders can relate the experience of being underwater slightly in a fast moving market and thus desiring to exit as soon as a decent amount of profit is accrued on the trade. This is what basically what happened, so as Nat Gas came back to the 38% this was deemed good enough and the market was exited at 4.186 for +19 ticks.
Just last week the Nat Gas Future was trading around 3.800, and was near 3.600 the week before that, and as this is not normally a market we observe we were surprised to see it above $4 again. Natural Gas has been very bearish in general as huge new sources have been discovered from Pennsylvania to Texas, meaning more supply and thus lower prices. So on the fundamental basis we continue to maintain a bearish bias on Natural Gas, but we generally do not trade based on bias. However the early New York session was characterised by risk aversion again, like the latter part of yesterday's New York Session, and equity indices where dropping, along with commodities and the EURUSD. Natural Gas can be seen to have had a decent pullback in a longer term bearish trend, so thus we were not inclined to hold this long trade thru hell or highwater, and it looks like we were correct to just take what we had rather than wait for more. -5 is not a huge deviation anyhow but especially when it is countertrend, and also because although this inventory number signifies less inventory and thus bullish for gas, the truth is there is more inventory coming online as new taps are put on the Barnett and Marcellus Shale.
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