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Saturday, August 29, 2009

Nat. Gas... the sea change

I have become a fan of Natural Gas.

The economy has stabilized, which means more nat. gas usage, and the American winter should be harsher than usual due to the unusually colder summer.

There is no secret as to why natural gas is on such a negative trend. American was able to tap into its huge reserves, and the drilling has allowed a huge increase in storage. With the lack of use from the colder summer and decline in manufacturing activity, the laws of supply and demand have simply come to pass.

The summer is ending, and the world economies have stabilized, and I think now the time to get into nat. gas plays. I normally play UNG, however I keep reading about the 'super contango' that is taking place. So I am reluctant to play UNG, especially since I think the natural gas story is a multi-month trade... not a day trade.

As such, I will look to play (and trade around) two Nat. gas play... CHK and KMP. I like CHK for the asset appreciation (which I will be using primarily to trade around the trend), and KMP for the increase usage (which I plan on holding for the dividend and appreciation until Dec or so).

Both are at consolidated levels that are to my liking for an initial position. (And will do so sometime on Monday)

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