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Natural gas futures heating up on move above 200-day MA

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Energy stock traders like to keep an eye on the underlying commodity to see some confirmation from previous analysis and they're beginning to get some bullish confirmation from Natural Gas futures in recent sessions. While the June Natural Gas Futures (ng02m) chart settle back to $3.35 today, yesterday's bullish action has this futures contract making some headway above it longer-term 200-day moving average.

June Natural Gas Futures Chart - Daily Interval

In late December we notice some bullishness taking place in some energy producing stocks like Apache Corp. (NYSE:APA) near the $50 level and felt the MARKET may be thinking that energy prices were about to take a turn higher. Often times, stocks lead an advance in the commodity that they actually derive revenue from. The past couple of sessions have been longer-term bullish in the natural gas complex as the June futures made a fairly powerful move above their 200-day moving average.

This action may be partially due to futures contracts for March expiring and some positions being rolled forward, but bullish nonetheless.

Subscribers may have claimed a stake or traded Apache (APA) for some profits in recent months and there will be other stocks also trading more bullish.

One stock that I've got my eye on that is a more "pure play" on natural gas prices is shares of Vintage Petroleum (NYSE:VPI) $13.51 +4.48%. I was looking at the stock as a potential bullish play this week, but the stock has move up a little too much for my liking this week. If I see a pullback in Natural Gas futures back near the $3 level, then I'd take a look at VPI as a bullish play near $10.90.

I need to do some more work with my retracement brackets like we did with Phelps Dodge (NYSE:PD) and Copper futures that really helped us in a bullish play there.

What interests me in VPI at this time is the 200-day MA on its chart is up at $15.59 and this stock may have some "catching up" to do with what we're seeing in Natural gas futures.

The strength in Natural Gas prices also may be playing into the economic bulls scenario going forward. Natural Gas is a sensitive commodity as it is heavily used at the industrial level during higher levels of production for gas-fueled furnaces.

A "hot summer" may also boost demand for the commodity as air conditioning usage begins to rise.

Companies that comprise the Amex Natural Gas Index (XNG.X) 194.95 +0.71% are (APC, APA, BR, DYN, EP, GAS, EOG, KMI, NFG, NI, NBL, OEI, PPP, STR and WMB).

Jeff Bailey
Senior Market Technician
Option Investor

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