July natural gas futures (NG_N) have traded higher in six consecutive sessions and have not yet experienced a daily decline thus far this June. History suggests such momentum in the warm weather months typically continues and natural gas typically moves higher. July Natural Gas (NG_N) finished Friday at $12.693.
Q: How has the Natural Gas futures market performed in the past when, in the second or third quarter, it rallies in six consecutive days, closing above its upper Bollinger Band* on the last day?
* A Bollinger band measures the standard deviation of the market's returns over the last 20 trading days, and plots bands two standard deviations above and below the average price over the last 20 trading days.
A: According to the nine previous occurrences of this event, omitting repeat occurrences within 10 trading days, New York Mercantile Exchange (Nymex) natural gas futures has shown a strong bullish edge that peaks 16 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Friday, June 6, 2008) is Monday, June 30, 2008.
Nymex natural gas rallies in 89% of the cases (8 of 9) by an average of 10.1% relative to the close on the event date. The one decline was 2.1%. The overall return of the nine cases is 8.7%, which, based on the close on the event date (@12.693), provides a target price of $13.797.
Ryan Soudan is an analyst with MarketHistory.com.
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