Wednesday, July 23, 2014

Why is Natural Gas falling since 2008 top? Major downtrend might have resumed!

Natural Gas is a very important Energy commodity and is widely tracked and traded. 
This commodity is important not only from its usefulness during winter but is also heavily traded. A lot of the fluctuations in prices of Natgas is believed to be determined by weather conditions of developed nations like Canada, USA, UK where it is most consumed during cold weather conditions.
However, predicting weather is not our forte and we leave it best to the weather experts to determine the temperatures across the globe and to environmentalist who are worried about Global warming.
We are chartist and Elliotticians that uses charts of commodities or for that matter any freely traded asset class to determine the trend and trade in that direction irrespective of weather forecasts. The below is a weekly chart of Natgas since 2008 onwards and the commodity is in major downtrend for more than 6 years now. 
Natural Gas weekly chart:
Wave Analysis:
As shown in weekly chart of Natural Gas, from the start of 2012 prices were moving higher in upward moving channel. Each time prices respected the channel support and accordingly moved higher. However, this time scenario is different where prices have broken below the channel and currently consolidating below the same. This suggests that prices might start correction on downside over short term to medium term. We have also shown small downward moving red channel. Currently it has arrived near the support of the same. It is very difficult to say at current level that prices will break down from this channel. Hence, one should form trading strategy as per important support and resistance levels. In the entire down move from 285 to 250 levels not a single weekly bar has given close above prior bars high and trend continued on downside. As long as this structure remains intact trend is negative and the day we will see close above prior week’s high that will be the first confirmation that relief rally on upside may come.
As shown in Daily chart, (shown in actual report)
In short, any move below 245 will take prices towards 225 levels where next support comes… This was mentioned in our morning research report on 17th July and Natgas has already hit the low at 227.10 levels on MCX today morning. The trend has just started and there is more to it.
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