December Natural Gas is up 1.9 cents at $5.231 this morning as I write. The enclosed chart shows that December Natural Gas fell sharply again yesterday for the fourth day in a row. As a matter of fact, just 5 trading days ago, natural gas had broken out over the price highs of the past three months only to about face and fall sharply and, as of yesterday, take out the price lows of the past month. Talk about whipsaws! The directional movement indicators are bearish but the ADX line is meandering sideways at a low level, suggesting that there may not be a lot of downside momentum left to take natural gas a lot further down, right away.

Followers of this letter should be long one December Natural Gas from $5.721 and short one December Natural Gas ($5.50 strike) call option from 60 cents, and long one December Natural Gas ($5.30 strike) put option from 40.2 cents and short one December Natural Gas ($4.80 strike) put option from 19.2 cents. Option expiration is in 27 days. I also continue to recommend buying the December 2012 Natural Gas at $7.25 GTC.

I recommend staying with this position for now.

Oct. 27, 2009
David Hall