The recent boom in the commodity markets, and more specifically the energy markets, has been swelled by the precipitous decline in the dollar. WTI Crude oil futures reached another all-time high on Wednesday, and Natural Gas futures are also on a strong bullish run. Wednesday, NG gained a 'big' 4.1% closing at $9.741 per mmBtu and pushing the RSI (Relative Strength Index) above 70. Should traders expect the NG rally to continue? Let us turn to history...
Q: How has NYM.NG performed in the past when, in the First Quarter, it experiences a 'big' rally while the RSI is above 70?
A big rally is a percentage gain of more than one standard deviation above the average one-day percentage change measured over the last 30 trading days.
A: According to the 10 previous occurrences of this event, omitting repeat occurrences within 10 trading days, NYM.NG has shown a strong bullish edge that peaks 21 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Wednesday, March 5, 2008) is Friday, April 4, 2008. NYM.NG rallies in 90% of the cases (9 of 10) by an average of 15.7% relative to the close on the event date. The average of the one decline is -2.6%. The overall return of the 10 cases is 13.9%, which, based on the close of NYM.NG on the event date ($9.741), provides a target price of $11.095.
If you would like to see more details of this historical edge, go to www.markethistory.com
Note that there is an occurrence of this event on 2/19/2008 which has not reached its peak yet, but thus far is performing quite well. The event occurred again as of the close on 3/5/2008.
HYPERLINK "http://www.markethistory.com/staff/detail.html?s=rsoudan" Ryan Soudan is an analyst with MarketHistory.com.
