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Trading Natural Gas 2012-11-01

I have made a long entry this morning trading natural gas futures. My entry occurred at 8:45 in the morning (my time) at a price of 3.68. This was 15 minutes after the EIA (US Energy Information Administration) natural gas storage report was released. The report was very slightly below expectations, but this was not my primary reason for entering the trade. As usual, my reason for entering the futures trade was technical. Specifically, an MACD divergence on the 60 minute chart.

To be honest, I'm not really expecting much from this trade. Since I entered after the report was released and my expectations are low, I am going to tighten up my trailing stop on this one. I certainly can't see myself carrying this trade over the weekend, and maybe not even into tomorrow. If I see a 10 point gain, I will almost certainly take it.

It is rather difficult to say where natural gas prices will go from here. Since hurricane sandy has ravaged the eastern coast, we are still one EIA storage report before the hurricane. As this last data, on Nov 1, 2012, was for storage data ending of Friday the 26th of October.

What does this mean? It is quite possible that there was a sharp decline if off shore production along the US east coast over Monday and Tuesday of this week. But we won't really know until next week's EIA report comes out on Thursday, Nov 8. For now, we are left "feeling" our way through market sentiment. Which brings me to my trading natural gas futures chart.

Let us observe this 60 minute chart for December natural gas futures.

What you see here, is an MACD divergence. It is not a textbook divergence, as it has some flaws. However, I made an executive decision to trade it anyways. Why? Well, it would have been a very nice MACD divergence if that one bar poking out of the bottom of Tuesday morning hadn't gone to 3.65. This was on Tuesday when the hurricane was hitting the US coast, and markets were shut down. In my mind, that bottom tip of the bar doesn't exactly count and can be an exception. We'll see, if I am wrong, I'll be stopped out. Its as simple as that. As always, I am using a trailing stop for this trade.

In other markets, I'm still waiting for gold prices to make lower lows. I'm watching sugar because I think there will be a new buying opportunity soon. However, I am watching passively from a distance, and I am not ready to enter a trade there just yet. I am just watching the dollar index too. There is no trade there for me at this time.

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