With the fundamental supply and demand conditions on their side, natural gas related exchange traded funds are breaking out from a rut that extended over much of the winter months.
For instance, the U.S. Natural Gas Fund (NYSEArca: UNG) was up again Friday, gaining 1.3% in trading. The fund has been trading over its 50- and 200-day simple moving averages.
Currently, natural gas futures are moving on colder-than-expected weather forecasts and an expected draw down in gas stockpiles, according to Boost ETPs, a European fund provider known for its leveraged and inverse products. Natural gas is trading around $3.87 per million British thermal units. [Natural Gas ETFs Rally on Inventories, Weather]
“A squeeze on shorts may be seen over the coming weeks,” Boost ETPs said.
Currently, CFTC data reveals that net short positions are not as the peak. There are currently -132,980 lot short positions, or almost in “middle of the range,” compared to prior years.
The company anticipates a bull flag breakout to gains of $3.93 per million Btu next, pointing to a “golden cross” formation in the 20-, 60- and 250-day moving averages . The provider also warns of supports at $3.59 per million Btu ahead of $3.46 per million Btu.
“As information is disseminated through the market place, the trend suggests that prices have been rising and that they continue to rise for a while longer,” Boost ETPs added.
U.S. Natural Gas Fund
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.