Often on NG we trade the price verses the extended weather trend. Days like this expose the problem. It was not getting colder, nor was it getting warmer, rather the weather temperature pattern remained sideways. Soon we will see a break out to the warmer temperature trend of spring. Current demand for NG, even though minimal at this time of year results in the Friday dip on HND or DGAZ.
At this time of year dynamic changes in weekend weather can occur. For those concerned on a D-side position look at a 3 month chart daily bars. One can see the price action on D side Feb 1st to Feb 8 last month will likely mirror the current HND price.
Previous occurring dramatic weekend weather changes had an impact on NG spot and HND pricing. Of note, Jan 25th close HND $3.91 to Monday Jan 28 open HND $4.22, a gain on positive weekend gap of 7.9%. That was driven by a reversal of strong north Friday wind to weekend south flow of winds into mid-west and Chicago.
We as traders make decisions on the current early March storm, now exhausting and will leave the New York region. We know the answer the question of why the NG spot is still ascending today. The weather has not broken the current weather trend -sideways range temperature at this time. But what about your current position in HND? This trade was set up from Feb 22 to Monday Feb 25 where a close $4.27 Friday to the open Monday $3.98 was established. We waited for this storm to end and a report to complete. Waiting patiently to buy at $3.65 is not far off the low today.
At time of article, Friday March 8th 2:35 PM EST, the day low HND is $3.55 (6 cents off the Thursday low) and DGAZ $15.39 (38 cents off the Thursday low) minimal variance day to day. This dip is not a concern longer view as we were buying up off the Thursday lows. There is no strong weather system negative to the trade next week. Clear to light cloud should be on skies over New York by end of weekend. Current New York is low 32 F but forward New York city forecast is Sat 48 Hi, Sun 50 F high and Mon 56 F Hi. If this is somewhat reliable we would see a gap up on Monday in our price position, possibly a high 10 % above the Friday low. Next week Monday to Thursday will reveal if this is indeed the low HND / DGAZ price established for March 2013.
Forward thinking, I believe we should see a low on NG spot by April $3.20 - $3.25 or below if a cool to moderate spring into May. This will bring very good profits to the HND or DGAZ trade.