As global economic worries continue -- and the fate of the US dollar remains unclear -- traditional commodities remain relatively attractive. As basic microeconomic principles drive the prices of these traditional commodities up, could it be time to take a look at other commodities, the ones that don’t get as much publicity -- such as natural gas?
Natural gas is attractive because -- like oil or gold -- it can be used as a hedge against inflation or a weak dollar. Additionally, it's a form of clean energy. Thirdly, the stimulus package hasn’t fully hit the economy as yet; when it does, the wheels at many factories will start churning, driving up the demand for natural gas. Lastly, the Climate Prediction Center in Camp Springs, Maryland forecasts that warmer-than-usual weather will stretch across the US, depleting inventories and driving up the demand for electricity from gas-fired power plants.
From a supply perspective, the Energy Department recently reported that overall production of natural gas will be cut by 1% due to reduced exploration of the industrial and power-plant fuel.
As we all know, the commodities industry is volatile. When grabbing exposure to natural gas through the aforementioned equities, you should always keep the risks involved in mind. To moderate these risks, it's vital to have an exit strategy.
According to the latest data from SmartStops , an uptrend in the previously mentioned equities will be triggered at the following price points: DVN at $54.02; AEZ at $0.88; KWK at $8.59; SD at $7.46.
Author: Chuck LeBeau
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