Natural Gas and the Influence of La Nina

By: Bob Hoye | Tue, Oct 25, 2016
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Technical observations of RossClark@shaw.ca

Look for a high in gas prices soon, a correction and then a rally into the summer of 2017.


Oceanic Niño Index

Oceanic Nini Index
http://ggweather.com/enso/oni.htm


Histograms identify October of moderate La Niña's

Natural Gas Futures Monthly Chart 1996-2016

The tropical Pacific Ocean goes through natural warming (El Niño) and cooling (La Niña) cycles. Last winter was categorized as a 'very strong' El Niño comparable to those of 1972/73, 1982/83 and 1997/98. Subsequent years see moderate La Niña's. This year is experiencing such a cooling trend.

Natural gas futures contracts have a limited trading history, dating back to 1995. When we view the relationship between them and the La Niña Years we find a correlation. Natural gas tends to be strong for seven to ten weeks in September/October and rollover in November (2010 initially peaked at 7 and then extended to 13 weeks). The current rally has finished its ninth week. The weekly RSI(14) normally topped in the 60's. It is now 68. Watch for a high soon and then a downside break of 20% or more.

Once a break of six or more weeks has run its course, we could look forward to the possibility of a rally lasting into the summer of 2017.

2016
Natural Gas Futures 2016 Daily Chart

October Tops

1998/99
Natural Gas Futures 1998/1999 Daily Chart
1999/2000
Natural Gas Futures 1999/2000 Daily Chart
2007/2008
Natural Gas Futures 2007/2008 Daily Chart
2010/2011
Natural Gas Futures 2010/2011 Daily Chart

 

Energy stocks that can be monitored for purchases on a deep correction:

In the US; Pioneer (PXD), Apache (APA) and WPX Energy (WPX). In Canada; Crew (CR), Seven Gen (VII), Encana (ECA), Advantage (AAV), Paramount (POU), Painted Pony (PPY), Bonavista (BNP), Peyto (PEY), Birchcliff (BIR), Tourmaline (TOU) and Enerflex (EFX).

 


 

Bob Hoye

Author: Bob Hoye

Bob Hoye
Institutional Advisors

Bob Hoye

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