Weather models MUST have us very cold---huge gap higher in NG!!
(Was time for new thread!)
Thanks very much for getting us started in the ng market tjc!
You are correct on the additional cold.
The much colder changes from all of Friday mornings models have carried thru over the weekend. Instead of a warming trend in week 2 that was pronounced on Thursday, we have a continuation of the pattern.
-AO and an upper level ridge, trough east couplet that is favorable for cold in the eastern half of the country.
More discussion on that on the AO/NAO page from yesterday with no change today.
The low so far today is 2.781. Friday's high was 2.717. Last weeks high was 2.738, which means we have a daily and weekly gap higher.
My ideal set up in this situation is to be looking for place to go short when the guidance turns milder............ONLY when the guidance turns milder, for the following reasons.
1. We've had a big bounce of almost $4,000/contract.
2. The market is oversupplied(bearish fundamentals)
3. Seasonally, November is one of the weakest months.....unless temperatures are well below average
4. Like you, I like to try to pick tops and bottoms and this top will occur from a weather pattern change to warmer.
However, being long has been the way to make money in ng with this cold pattern and it can continue higher as long as we stay cold. Being long here is a good idea if maps get MUCH colder overnight. There is another gap from last Sunday Night that is being left far behind now and was obviously a break away gap..... 2.480-2.499.
This could be another break away gap with increasing cold or it could be an exhaustion gap if the weather turns milder. Trading back into Friday's price range is the technical formation for gap and crap, exhaustion gap.
Technicals mean zero in a weather market. The weather is what determines the chart pattern first, not the other way around. In other words, if we fill the gap and fail, then many people find out about the milder weather, they will think the market predicted that milder weather before the forecast reflected it.
No, that's not it. The traders that knew about the weather changes first effected the price before everybody else found out.
The high risk in following chart patterns in a weather market is that they bust quickly when the weather changes. Last Thursday, for instance we had a huge downside reversal in ng. New highs for the move, followed by a sharply lower close. I put on a few short trades on the way down(and was leaning strongly short) but backed off very early Friday when the GFS ensemble suddenly turned colder again.
I was still looking short on Friday morning because of the chart formation but needed the weather to turn back milder to confirm it. Instead, the weather got MUCH colder and shorting at any time Friday based on the previous days negative price action would have likely cost money......being long Friday on colder weather was the way to trade AGAINST the techical formation put down from Thursday.