Nat Gas is currently entering a bearish month seasonally. Since 1990, the July win percentage is only 41%, and to make matters worse losing months averaged (60)cents while winners averaged .42.. So you are looking at 2-3 pot odds along with your lousy odds of making that hand.
The COT currently shows a mixed picture with Commercial Hedgers sporting a relatively weak score of 29% - However, their 4wk buying total of 77k contracts scored 91% on a 18m + 5yr basis.. This paints a picture of heavy shorting and hedging into the May highs of $3.60, and now covering some off.
With this muddy, but leaning negative backdrop, I was surprised to see the Sunday night Gap which formed a quite bullish pattern called Island Reversal - This is when a preceding gap is followed by another in the opposite direction. The problem is there was no volume to the gap, and both the 60 min and daily chart are now showing indecision.
On the above you can already see lower highs. If you look at the daily view, you will see a Doji Star type candle which marks indecision. Our bet is the gap gets closed.
How to trade it.
Sell NG futures @ 3.05.
Sell the 2.95 put for .075.
Target profit is .17 cents.
Exit the trade on a hourly close above 3.10 - This should be a roughly 3cent loss across the option + Future.
R/R = almost 6-1.
Good trading to all
The COT currently shows a mixed picture with Commercial Hedgers sporting a relatively weak score of 29% - However, their 4wk buying total of 77k contracts scored 91% on a 18m + 5yr basis.. This paints a picture of heavy shorting and hedging into the May highs of $3.60, and now covering some off.
With this muddy, but leaning negative backdrop, I was surprised to see the Sunday night Gap which formed a quite bullish pattern called Island Reversal - This is when a preceding gap is followed by another in the opposite direction. The problem is there was no volume to the gap, and both the 60 min and daily chart are now showing indecision.
On the above you can already see lower highs. If you look at the daily view, you will see a Doji Star type candle which marks indecision. Our bet is the gap gets closed.
How to trade it.
Sell NG futures @ 3.05.
Sell the 2.95 put for .075.
Target profit is .17 cents.
Exit the trade on a hourly close above 3.10 - This should be a roughly 3cent loss across the option + Future.
R/R = almost 6-1.
Good trading to all