Bull Markets Are Measured by “Price and Time”

My reports focus on Natural Gas rates because it is the largest source of energy for the generation of Electricity in many regions; therefore, Natural Gas and Electricity rates are highly correlated.

Starting with my March 7th Energy Alert, I warned the characteristics of a major bottom were in place. Since my March 7^th Energy Alert, Natural Gas has remained in an uptrend with no major corrections. As you can see in the chart below since my March 7th Energy Alert, Natural Gas has rallied nearly 85%, trading from a low of $1.611 per MMbtu on March 4^th to a high of $2.973 today:

In my June 1^st Energy Alert, titled “The Longer You Delay, The More You Will Likely Pay!”, I warned prices were likely heading higher, and since this report Natural Gas has rallied an additional 25%. Clearly if you did not heed my warning and delayed hedging your cost of Electricity or Natural Gas, you will pay more today than on June 1^st.

But the question is, if you did not heed my warning and did not hedge your cost of Electricity or Natural Gas should you continue to delay hoping prices will decline? My answer is no, and I base this on the following:

Bull markets are measured by “Price and Time”. The chart above shows Natural Gas’s rally since my March 7^th report. Notice I drew a “Triangle” in green, in which the width of the triangle represents the length of time of the rally, and the height of the triangle shows the increase in price during the rally.

You might be tempted to say my goodness I cannot buy now, prices are too high, I better wait for prices to decline. Besides, how much higher can prices go? While I agree prices will not go higher forever, I believe we are still in the early stages of the Bull Market rally discussed in my June 1^st Energy Alert, and we still have much further to go as measured by “Price and Time”.

In my June 1^st Energy Alert, I delineated the similarities between the spring lows in 2012 and 2016, and based on their similarities Natural Gas and Electricity rates likely have much further to go as measured by “Price and Time”.

The chart below will give you a better sense of where we are presently versus what took place in the spring of 2012:

If you compare the size of the triangle from the spring low in 2012 versus the size of the triangle from this year’s spring low, you will appreciate why I believe this year’s rally is still in its early stages and has much further to go as measured by “Price and Time”, and why we continue to recommend you hedge your cost of Electricity and Natural Gas.

Not every client’s risk tolerance and hedging strategy is the same, but we trust the above report will help you put into perspective the risk/reward opportunities at this time. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Senior Commodity Analyst
727-400-3170