Market Overview

Bullish Signals On Natural Gas Pays Off In Huge Way On XTO ENERGY INC (NYSE: XTO) And Others!

Bullish Signals On Natural Gas Pays Off In Huge Way On XTO ENERGY INC NYSE: XTO And Others!

As I wrote my research report on natural gas one week ago today, I found myself bullish on stocks like CHESAPEAKE ENERGY CP (NYSE: CHK), XTO ENERGY INC (NYSE: XTO) and even small caps like CHENIERE ENERGY INC (AMEX: LNG). The key last week was the colder weather finally hitting most of the country and the dead lows natural gas was trading at. These combined with CHESAPEAKE ENERGY CP (NYSE: CHK) hitting the daily technical 200ma and stocks like CHENIERE ENERGY INC (AMEX: LNG) having 10% or more of their shares shorted. If there is one thing I have learned in my life as a Chief Market Strategist, it is go the opposite way of the crowd. These technical factors and last weeks natural gas inventory numbers helped solidify my position to be extremely bullish on natural gas and stocks such as CHK, XTO and LNG.

Since I wrote the research report titled "Natural Gas Inventories Fall Unexpectedly Causing Pops In CHK, XTO...More Upside To Come", US NAT GAS FD ETF (NYSEArca: UNG), is up more than 15%. This is a huge gain to say the least but it just gets better. CHESAPEAKE ENERGY CP (NYSE: CHK), which was hitting its 200ma at a price of $22.35 has soared to hit the 50ma on the daily chart at $25.25. This is a huge gain of 13%. Again, as a Chief Market Strategist I pride myself on not only being correct but on teaching my methods of analysis to those that wish to follow. Please note the multi bullish signals the sector was giving off. Extreme cold weather, natural gas at dead lows, 200ma on CHK being hit, huge short positions. These plus more combine to give the investment a 90% success rate or more!

Now by no means am I done. As good as the UNG and CHK swing trades were, let's not forget XTO. XTO was bought out by EXXON MOBIL CP (NYSE: XOM) for a 25% premium. Instant winner there too. What a gain on the buyout! Last but not least, LNG, huge short position and all, spiked over the last week from $1.85 to a high of $2.28. That is a 23% gain. Always look for small cap sympathy plays off of large cap news or sector momentum. That is one of these easiest ways to make solid profits time and time again. Learn the rules, the profits will follow.

Below is the exact story I published one week ago December 10th, 2009. Enjoy and stay tuned to future analysis and guidance.

Natural Gas Inventories Fall Unexpectedly Causing Pops In CHK, XTO...More Upside To Come

As cold weather has blanketed the United States from east to west and north to south, natural gas has hovered at the lows until now. Natural gas stockpiles fell for the first time in nine months, down 64 billion cubic feet in the week ended Dec. 5. Natural gas has been one of the few commodities to not see a runup as with the likes of gold and oil on the back of a weak dollar. However, today things may have changed. What is so amazing about the jump in natural gas today is that Chesapeake Energy Corp. (NYSE: CHK), a leader in natural gas production, technically signaled the pop with a hit of the daily 200ma yesterday. That hit is a dead on alert to watch for a pop in the stock price of CHK. Sure enough, as if the technicals actually dictate the news and inventory reports, natural gas pops, helping Chesapeake Energy Corp. (NYSE: CHK) jump off its 200ma.

Other key natural gas stocks to watch are XTO Energy Inc. (NYSE: XTO) and Devon Energy Corp. (NYSE: DVN). These are seeing similar pops in their share prices though Chesapeake Energy Corp. (NYSE: CHK) is the only one that had the perfect technical chart setup.

Small cap natural gas plays, which are always a favorite sympathy play should natural gas continue to run higher are Royale Energy Inc. (NasdaqCM: ROYL) and NGAS Natural Resources (NasdaqGS: NGAS). These could see a major price appreciation due to short squeezes and low floats. Cheniere Energy Inc. (AMEX: LNG), an Amex play has over 10% short. Watch these closely should natural gas continue to run for a few days or be putting in a long term bottom.

Below is a chart showing Chesapeake Energy Corp. (NYSE: CHK) hitting the 200ma on the daily. Below that is the chart of the intra day UNG as the natural gas inventories were released. Note how CHK told technical traders to expect a bounce today and sure enough, inventories confirmated it.

Gareth Soloway
Chief Market Strategist

Posted-In: Options Intraday Update Markets Movers


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