November natural gas may very well be forming a tradable bottom at these levels. There are several reasons for this.
1) Seasonal patterns in November natural gas tend from the last week of August through the first week of September.
November Natural Gas Seasonal Chart
2)The commitment of traders commercial category continues to add to their positions, adding 11,000+ contracts last week which places them within shouting distance of their all time record long position. Perhaps, more importantly, commercial traders are becoming increasingly bearish on crude while building net long positions in natural gas.
3) The crude oil spread versus natural gas is bumping up against solid resistance at crude oil priced at 20 times the natural gas price. This is reflective of the commercial traders price action.
4) The COT Signals triggered a buy signal for Monday's trade which corresponded with a technical breakout to the high side.
There are two natural gas futures contract sizes. The full size carries a margin of $5,400 and recent average day range of $1,600. The mini contract is 25% of the full size contract. The margin requirement is $1350 and its daily range is around $400.
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This blog is published by Andy Waldock. Andy Waldock is a trader, analyst, broker and asset manager. Therefore, Andy Waldock may have positions for himself, his family, or, his clients in any market discussed. The blog is meant for educational purposes and to develop a dialogue among those with an interest in the commodity markets. The commodity markets employ a high degree of leverage and may not be suitable for all investors. There is substantial risk in investing in futures.
