Read Ramki’s article in Seeking Alpha about why it’s still not time to buy natural gas.
About ten days ago I posted an hourly chart of NYMEX Natural Gas, and suggested that perhaps we were unfolding in a diagonal triangle. I also went out of the way to suggest that it was unlikely that we were in the middle of a ‘third of a third’ wave because typically such a position would require a fast paced sell off. To put it mildly, that was two mistakes in one post! Prices have continued to edge lower, and the bearishness is only getting more pronounced. While there are still some valid arguments against the 3rd of 3rd count, in the spirit of what WaveTimes has long stood for, ie what matters is not your count, but whether you were right in the direction, I have to concede that I got it wrong this time.
Natural Gas has become the subject of some discussion in recent days as some players are getting ready for a potential ‘third wave within a third wave’ kind of a move. Naturally, getting on board such a move will be very profitable, because ELLIOTT WAVE Principle tells us the third of the third will be the most powerful move. However, when I looked at the chart this morning, I get a different impression of the waves. Of course, I am writing these comments about 10 days after the analyst who first presented the world with the idea of the 3rd of third, and hence enjoy some degree of hindsight which he didn’t have. Just remember that what I am attempting here is to present a different view of the picture, and not in anyway denigrating the work of the other well respected analyst.
When I study the chart of Natural Gas, I see that we have completed an extended third wave at $3.55. The subsequent recovery went as a 4th wave to finish exactly at the 38.2% retracement level. The subsequent sideways movement could legitimately be considered as part of a complex flat, but adding my own spice to it makes it look like an expanding diagonal trainagle. Now Elliott Wave theory says that when a diagonal triangle occurs at the fifth wave position, its internal waves are made up of three legs each, and there should be five waves. From what I can see in the chart here is we have either finished, or are close to fnishing the third wave within the diagonal triangle. Thus, (ideally from near $3.61) we should get ready for a recovery, which is exactly the opposite direction of a ‘third of third’ scenario).
So you are wondering who is right? I suggest that you let the market be your guide. As explained in my book “Five Waves to Financial Freedom” a third wave has a certain personality, and surely a ‘Third of third” will have the most outstanding personality. If the subsequent move seems to be a fake, ie not have the personality of a third wave, you should conclude that the diagonal triangle approach is probably the more accurate one. Again, bear in mind that the goal of all analysis is to make money, and not to evaluate which count is better. You can use Elliott Wave analysis of Natural Gas to make lots of money, if you trade by observing all the rules and guidelines explained in any good book.
Elliott Wave Analysis of Natural Gas Futures traded on MCX India. To be honest, this is the first time I am looking at this contract, and what I see is fascinating. There were so many easy opportunities to trade the Natural Gas Futures profitably on the MCX in India!
So what do the Waves tell us? First of all, we can see a clear five wave down move on the left of the chart. There was an extended 3rd of the 3rd wave, a move that covered 4.618 times the distance of the first wave. Next, you would have prepared yourself for a complex correction because the 2nd wave was simple. Sure enough, you got an irregular ‘B’ wave. The 4th wave ended nicely at the 38.2% retracement level of the 3rd, and the final 5th wave also finished at a technical level (50% of the distance from 0-3).
You would have gone long the Natural Gas futures contract near the end of the 5th wave. There was a bit of choppy correction that ensued, because the B wave also was an irregular correction, but hey-presto, it finished at the 50% retracement level. Anyone who was patient could have loaded up nicely near there (waiting to add at the 61.8% lvls, but which never showed up!). Then we embarked on the “C” wave, which I think has just finihed its own 4th wave, and we are in the fifth wave of this move. So it is rather late in the day to consider buying now. Rather one will watch to see what happens near the 210.60/80 and sell there if the momentum fades.
That concludes this short lecture on Natural Gas Futures on the MCX in India. Share it with all those whom you think want to learn how to trade commodities using Elliott Wave Analysis.