Natural Gas Shorts Back On (UNG) (CHK) (KWK)

July 11, 2012 11:06 AM EDT
It is time to put natural gas shorts back on, stated Hedgeye Risk Management analyst Kevin Kaiser. He is recommending that investors short the United States Natural Gas Fund, LP (NYSE: UNG).

According to Kaiser, the market has largely priced in hotter weather. He also sees less incremental gas/coal switching. Tomorrow's EIA storage data should also be bullish for UNG, with some calling for a build of inventory that is 20 bcf above the long term average.

Other interesting developments for natural gas include extremely bullish non-commercial sentiment, which is at the highest level since August of 2010 and could signal overbought conditions.

Credit Suisse recently said that natural gas/coal switching ends when natural gas prices reach the $2.80 – 3.10 level. If so, the rally is over. Credit Suisse also recommends shorting natural gas.

United States Natural Gas Fund, LP (NYSE: UNG) is trading higher by nearly 2 percent today, but is off weekly highs above 20. Natural gas futures are trading at $2.80 per million BTU.

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