Weekly Update: December 11, 2013

| December 11, 2013

Weekly Update:  December 11, 2013

 

Commodity Watch:

The price of natural gas is bounding higher thanks to a remarkable bout of early season cold.  The US hasn’t even hit winter yet and temperatures are below freezing over a large swath of the country.  As a result, natural gas is already near last winter’s high of $4.40 mmBtu.

However, I’ll be very surprised if the commodity can break through $4.40 on the first try.  Given the fact that the NOAA is expecting a warming spell in coming days, we should see natural gas take a breather.

In fact, that’s precisely why we closed our trade in the US Natural Gas Fund (UNG) January 2014 $19.00 Calls on Monday for a 90% gain!

But remember…

Natural gas investors are starting to realize we may be in for one heck of a long and severe winter.  As a result, traders will be chomping at the bit to buy into any short-term weakness in this commodity- and so will we.

So be patient, we’ll have another opportunity for natural gas market profits soon!

Here’s an update on the remainder of our open portfolio positions…

 

Portfolio Recap:

. . . . US Oil Fund (USO) January 2014 $34.50 Calls

Crude’s been on a nice run of its own recently.  In fact, WTI jumped from $93 a barrel last week up to as high as $98.66 in yesterday’s trading session.

But today was a different story as WTI crude ran smack dab into technical resistance at the 200-day moving average (blue line in chart below).

Take a look…

Crude Oil

As you can see, WTI ended the day firmly in the red.  However, given the Cushing pipeline news we talked about last week, this pullback will likely be short lived.

Let’s keep holding our USO calls for higher oil prices…

. . . . iShares Comex Gold Trust (IAU) January 2014 $12.00 Puts

Gold is starting to perk up a bit…

The yellow metal has put together three days of gains thanks to the newfound belief that Fed tapering will be delayed until next year.  Given the recent bout of bullish economic data, I can’t say I agree with that theory.

What’s more, Fed Chairman Ben Bernanke is under growing pressure to start bringing QE3 to an end. And since inflation is benign, I doubt we’ll see too much upside for gold in the near future.

However…

We need to keep a very close eye on this commodity going into next week’s FOMC meeting.  If the commodity keeps the strong bid it has now, we may have to switch gears and establish a position on the long side of the precious metals market.

For now, just keep holding these January $12.00 IAU puts for further downside in gold…

 

Category: Commodity Trading