New York Mercantile Exchange natural gas futures dropped 0.5% on Thursday, the third successive decline, closing the day at $7.452 per mmBtu. During the session, natural gas crossed below its 50-day lowest low.
Q: How has Nymex natural gas futures performed in the past, omitting repeat occurrences within 10 trading days, when it has seen three consecutive declines to cross below its 50-day lowest low during the fourth quarter?
A: According to the 17 previous occurrences of this event, EventEdge indicates that natural gas has shown a strong bearish edge that peaks 19 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Thursday, Nov. 29, 2007) is Thursday, Dec. 27, 2007.
It has declined in 82% of the cases (14 of 17) by an average of -11.9% relative to the close on the event date. The average of the three rallies is 3.9%. The overall return of the 17 cases is -9.1%, which, based on the close on the event date ($7.452), provides a target price of $6.774.
When we tighten the parameters and ask the Market Information Machine (MIM) how natural gas futures have performed after the above event just in November rather than in the fourth quarter, we get a much stronger edge.
According to the eight previous occurrences of this event, EventEdge indicates that Nymex gas has shown a very strong bearish edge that peaks 26 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Thursday, Nov. 29, 2007) is Tuesday, Jan. 8, 2008.
Nymex natural gas futures declined in 100% of the cases (8 of 8) by an average of -18.2% relative to the close on the event date. The overall return of the eight cases is -18.2%, which, based on the close on the event date ($7.452), provides a target price of $6.096.
If you would like to see more details of this historical edge, go to www.markethistory.com
Ronish Patel is an analyst with MarketHistory.com.
