Stockchase Opinions

Pat Naccarato U.S. Natural Gas Fund E.T.F. UNG-N COMMENT Sep 10, 2008

He currently has no energy exposure in his fund, but natural gas is an area he is starting to look into. Breakeven amount for making money in production is over the present price of natural gas. Producers will have to cut supplies, which will ultimately restore the balance. Could take a little while.
$34.020

Stock price when the opinion was issued

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DON'T BUY

Nat Gas. Futures contracts. Are trading down short term and not so much further out because it is a short term supply issue. When LNG distribution starts, that is a game changer. He owns the companies, not the ETF. There is a problem with them having to rebalance.

TOP PICK

The chart shows a nice little break-out recently, and the trend is clearly outperforming the market. Seasonally, natural gas moves higher from September right through until the beginning of December. Also, weather forecasters are talking about an El Niña, which means a colder than average winter. It is amazing how often natural gas peaks in the 2nd week of December.

PAST TOP PICK

(A Top Pick Oct 14/16. Down 19.51%.) (All these picks started off with positive seasonality between now and the end of the year. On the technicals, at the very least, you want the security trading in an upward trend and outperforming the market.) Technicals had very quickly deteriorated and it started to underperform the market, developed a downward trend and it was Stopped out. The warm weather is what happened. The period of seasonal strength ends in the 2nd week of December.

COMMENT

This has a history of bottoming right around the end of August, and then moving higher through until the 2nd week in December. Natural gas prices have been bottoming during the last few weeks. Very briefly, a few days ago, this moved above its trading range. These normally go significantly higher, usually around the middle of December. You have to be aware that there is a contango involved in this particular product. His preference is to not to play natural gas directly, but to do it with equity securities.

WATCH

The spot natural gas market in the US has a seasonal peak period of mid-March to mid-June for cooling needs and September into December for heating needs. He does own some natural gas exposure in another ETF, but is looking to take profit sometime in June. He is more excited about buying in September.

TOP PICK
Strictly a trade within a trading range around $25 now. Resistance around $27.50. That's the range.
PAST TOP PICK
(A Top Pick Feb 22/19, Down 7%) An ETF of the short contract on US nat gas. He's trying to trade within a band to buy in the low-$20s and sell in the upper-$20s, like $27. We'll see what happens.
DON'T BUY
It has a seasonal period from March to Mid-June, then from September to December. He has trimmed back his position because it is not working in this seasonal period. Fundamentals are not driving it. Wait until next September. This ETF suffers from erosion.
DON'T BUY
He's traded this before. Commodities are trading instruments. Nat gas has broken down this year with old support becoming new resistance. Don't enter this space now.
COMMENT

Natural Gas. FCG is a way to play the concentrated natural gas. Would stay away from playing the commodity futures part such as with UNG. This is in a challenging market. If you are bullish on the energy outlook, would play it with FCG.