Dismiss Natty Plays at Your Own Peril:
Natural gas has been in the news recently with the surge to nearly $5 last November. There are better ways to play it other than the ETF UNG, which now sports a bearish head and shoulders pattern (head topped out at round 40 figure on 11/14/18). One way is the chart below of LNG, and how it appeared in our Energy Report on 1/5. Today it recorded a nice reversal, and has CLOSED the last 15 sessions above its rising 200 day SMA (50 day sloping higher now too). It’s quickly approaching a double bottom trigger of 66.33, which could also be interpreted as a bull flag formation.
Emerging Markets Affinity for Cheap Crude:
Emerging markets are still showing solid strength, and are still outperforming the US benchmarks. Below is the ratio chart of the EEM against the SPX, and it is showing a clear preference to the international names. The EEM is up nearly 7% in ’19 so far, while the S&P 500 is up 5.3%. Now there were certainly some reversion to the mean going on, but the emerging market economies are enjoying a depressed oil price too. WTI has the look of a bullish inverse head and shoulders, but fell 3% Monday. Natural gas dropped 8.4% with an Arctic Vortex on the way too.
When a name is lagging within a sector that is acting well, it is trying to convey something. Below is the chart of DK, a good example, and how it was presented in our Energy Report on 1/15. It now trades 51% off most recent 52 week highs and looks to be on the potential verge of undercutting its lows for Q4. One has to remember, not only energy but many groups have roared off their bottoms. It now trades at the round 30 number, a level it last touched last February, and its recent break below a bear flag carries a measured move to 22.