Natural gas prices are sitting at seven-year highs.
Not only is gas demand rising, supplies are running low, creating a crunch. In fact, according to Barron’s, there’s 17% less gas in storage year over year, and 7% less than the five-year average. Part of the reason for that is Hurricane Ida, which knocked out a good deal of gas production.
If you believe natural gas prices could move even higher, wait for related stocks to pull back.
Right now, most are overbought, and over-extended, including Chesapeake Energy (CHK), EQT (EQT), Cimarex Energy (XEC), and Antero Resources (AR). All could come down, near-term.
For example, look at a two-year chart of Chesapeake Energy (CHK), with RSI, MACD, Bollinger Bands (2,20), and Williams’ %R. Not only is the stock overbought at its upper Band, it’s excessively overbought on RSI, MACD, and Williams’ %R.
From a current price of $60.85, it could pull back to prior support just under $56.
Again, if you’re thinking of going long natural gas stocks on shortages, wait. Most of these natural gas stocks have become wildly overbought.
Or, pull up a two year chart of natural gas, applying the same technical indicators. You can see that every time these indicators align in overbought or oversold territory, natural gas prices tend to pivot in the other direction shortly after.