Trend Following Discussion

Rico,

I post infrequently on Pailin's thread, but mostly lurk. I do some single-day trading with ZSL and DZZ to hedge my bullion holdings. I don't like holding ZSL or DZZ for very long due to the ridiculous decay.

But I do think the way to invest is neither buy and hold for years nor to try to trade minute-to-minute. I've read several books on trend following and try to employ the philosophy.

Along that line, I am one of those who wonder aloud how low nat gas can go. So far, the answer is lower and lower. UNG, again, is an unacceptable way for me to play it because of the decay, meaning you can be right and still lose money.

I am handicapped in that most of my trading capital sits in IRAs and I am precluded from futures. So, I have been trying to ascertain my best nat gas play and am still looking.

Hopefully this thread will throw off some nuggets that I, as well as others, can use to get in on trends via individual stocks or ETFs.

Good luck with your thread.

I've had my eye on CHK off and on for years. Really liked when CEO kept buying, buying and buying.

Then it all went bad and the company bailed him out -- I believe by buying his art collection or some such ridiculous stunt.

I live in PA and the state is going crazy for Marcellus Shale fracking wells, even though some reports are that companies are losing money on each of them.

If CHK does, indeed collapse, might be time to go shopping.

Nat Gas is certainly an interesting market.

What I find interesting is how quickly prevailing in situ nat gas resources can drop to zero eroei with little to no advanced notice which is quite unlike liquid petroleum.

Further the manner in which reserves are calculated are quite varied

Add to this equation is that fertilizer and hydrogen are primarily sourced from Nat Gas

It makes a pyramid of energy complexity in a world with finite energy resources which I find intriguing

My last point is the amazingly high levels of energy required for LNG processing and transportation, not to mention the vast sums of financing needed to construct an LNG facility. For example a 7000 mile LNG transport circuit burns off 15 of the gas just getting to market. Anyone care to speculate on the cost to construct a LNG facility ? I am sure its off the charts.

Donpaulo,

The export LNG terminals will not be built from scratch; rather,existing LNG import terminals (hard to believe these were ever built) will be/are being converted to export facilities. Cherniere (LNG) is already reconfiguring. In fact, Cheniere is already approved  to export more than 2 billion cubic feet daily from its Sabine Pass LNG terminal in Louisiana--  and that represents about 14 percent of the natural gas produced in the United States (so says the Houston Chronicle).  LNG has the contracts signed. The U.S. needs to think of the frack gas as our tar sands. Export baby. From a trader's perspective, LNG trades in a channel that ping pongs 7% with news (positive and negative) breaking the channel on a regular basis. It's my number one money making trade.

Other big LNG players include BP, Southern Union and Freeport LNG.  Sure there are more (can't remember all the names). Louisiana seems to be ground zero on the export side, but import  terminals now being converted to export are found on the east coast too, (there is a huge one just outside of Baltimore). 

Good stuff.

I looked up ATR and found a few YT vids that go over it. Nice tool.

Rico - do you put any weight into Fib retracements on a mid/longer term time frame?

And how about bollinger bands?

I'm trying to weed out my trend filters, if you will. I have so much shit on the screen sometimes, I get all confused and my brain hurts. Not sure if I need like 5 or 10 to make the best bet decisions or maybe just 3? Not enough experience to know better, I guess. I used to by a 'buy and hold' "investor" until I finally realized that's a really good way to lose money in casino.

I am doing this trading too.  Right now focused on trading gold, silver, S&P, and oil.  I usually use mini contracts.  My current system sounds similar to yours.  I am using MA 5/13 crossovers with MACD and slow stochastics (similar to RSI).  If I get a positive or negative crossover with both slopes UP or DOWN (for a short) and the price is at or over the MA5, I go in.  I set my stop to the previous day's MA 13 (rounded down).  Most of the time this won't stop you out.  

If the daily candle is entirely over the MA5 then I use the MA 5 as the stop.  I notice that candles like that tend to either keep going or if they are doji-type candles they may signal a change.  Finally if I blow past the bollinger bands (I use them too) by 1% I want to take profit, then wait to re-enter either at a lower price using the MA13 stop or at about the ma5 level.  So far been doing ok using this.  

I look at the other signals too as confirmations, such as the slow stochastic going out of oversold/overbought, or being past a BB, to help determine where I want to go.  I also may take some more risk and buy an option on a MACD crossover where I may have a momentum trade.  I can ride out the ups and downs w/the option more so than with the future.

Looking at the various charts this does not appear to be useful for currencies and some of the other commodities.  For currencies mostly have been doing a trade here and there when I get some good ideas from other traders but also using just a trend and 21 day MA/stochastic as a point to get in either long on a pullback or short on a rally.   Right now I just don't know I think the euro has more legs and the dollar is now looking weak, but that could change fast so I don't feel confident in entering that arena.

Also trying to trade some stocks, still trying to come up with something useful.  Right now using Ichimoku cloud (which once I got past the seeming complexity is actually pretty simple) for daily (along with stochastics and the ADX) and for weekly I look at 10 week/30 week moving crossover.

My biggest issue is not being great at seeing these various "formations" - I get the concept, have read up on some, but I have trouble seeing anything like that in the chaos of real prices.

Just noted that a fair bit of the natty discussion was fleshed out over on Pailins trading thread.  However a candid"inside" opinion can be interesting and the whole idea that the glut of natural gas is so great when we apparently have only a 6 month of supply of silver, at current demand, makes the fundamental trend in Ag much more interesting from this angle.