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Tuesday, June 8, 2010
Chart of UNG & SWN
- Natural Gas is the only sector that is looking bullish right now. The oil spill catastrophe, offshore oil drilling moratorium, & growing government support of the "Pickens Plan" (greatly increasing tax incentives for natural gas vehicles) are all fundamental factors that are making natural gas and natural gas sector stocks more attractive.
- Furthermore, the price trend of Natural Gas, as reflected by UNG (a natural gas fund ETF that tries to mirror changes in percentage terms of the natural gas spot prices using natural gas futures), has shown that the fundamental factors driving the prices of natural gas are very unrelated to the fundamental factors driving the overall stock market, which is good because the overall market is very weak right now. And also, that price of UNG is about to breakout of its long-term bear market.
- There are many ways to play natural gas. You could go long UNG which is currently $8.19 with stop/loss of $7.40 or buy the Oct 8/10 call spread (buy Oct. 8 call $1.09 and sell Oct. 10 call for $0.42). I still like SWN as a play on natural gas, I believe SWN is taking a pause around it's 200-day moving average before breaking upwards.