Stock Trading

Natural gas multibaggers

Posted by Kristjan Kullamägi
Spread the love

I stumbled upon a pretty interesting trading thesis today about natural gas.

Most oil wells contain some percentage natural gas. As the amount of shale wells has increased over the years, as much as 40% of of the gas produced in the US today is a byproduct from shale wells.
This has lead to an increased gas production to the point where most dry gas producers are losing money.
Thanks to the multi year oversupply of oil combined with the recent demand glut due to COVID-19 leading to crashing oil prices, many unprofitable shale wells are being taken offline as mass bankruptcies in the oil sector has begun and also there is not enough room to store all the oversupply.
This will lead to decreased gas production and since the gas demand hasn’t dropped due to COVID-10, it -should- lead to higher gas prices – $UNG.

I don’t know anything about the energy sector but the thesis sounds reasonable and logical to me and could lead to some epic bounces in some beaten down gas stocks. It has already started as many have doubled or more the past month.

My main play is probably going to be the 3x ETF $UGAZ. This one went up over $300% in late 2018 and I will take a starter position today with a wide stop with the plan of adding as the thesis plays out over the next few weeks/months.

The run in 2018.
Could it do something similar this year?

In 2018, $UGAZ broke its downtrend/sideways range and the 10/20-day moving averages started acting as a support. Then it flagged for a month until it broke out and went parabolic

Some extremely beaten down gas related names are $RRC $AR $SWN. We may see some $300-500%+ moves here.
A few higher quality names $CNX $EQT $COG.
Obviously will have to wait for setups first and not blindly chase.

My main focus is still going to be waiting for buyable bases in my favorite growth stocks but this is a thesis I will track closely as many times cyclical commodity/turnaround stocks make bigger moves than the growth stocks because they are priced for bankruptcy.

Related Post

7 thoughts on “Natural gas multibaggers

  1. Rush

    Be careful with leveraged ETFs as buy and hold. Your risk to reward will be better with the natural gas stocks you mentioned. You can add OKE to that list. Natural gas stocks bottomed earlier than oil around March 9th. I will buy a basket of Natural gas Producers, supply chains, etc. except drillers and leave it there for a year. Good luck

    1. Kristjan Kullamägi

      Thank you!

      1. Tan

        i watching your videos on YouTube the sound appear very bad is it only me?

  2. Tan

    Spot on analys ! Flera av dessa. Är det för sent för gas/olja bolag??

    1. Kristjan Kullamägi

      Finns det en setup så finns det en trade. Annars inte

  3. Andy

    Hi Kristjan, how do you trade US ETFs in Europe after PRIIPS restrictions? I have an Interactive Brokers account (and I live in Finland), but I’m unable to trade US ETFs.

  4. roger

    HI kristjan
    After reading tons and tons of trading books over the years I started looking at youtube for guidance and with good luck came across you. I have been practicing and trying to find my own edge. I would like to request if you could do video on risk and position sizing specially for smaller accounts.

    kind regards

Leave A Comment