Past Experience of Natural Gas from prescriptive Technical Vs Fundamental

Hello Friends,

Here Im going to share one of my friend  past experience and example of  Technical Vs Fundamental.

I respect  both Technical and Fundamental analysis. But I still love to be Technical trader then fundamental  trader.

My Friend is Basically Commodity Fundamental Analyst.

Last July 2011 Period, He asked me about natural gas. The Price was quoting near  price $ 4 in US (COMEX ) and MCX price was quoting nearly Rs 205-210.

My Friend told me We are having heavy position in Natural Gas Long Side.

Lets Look at Natural Gas Life time high was 13.75 $ -Comex and Rs. 592 MCX Price.

At that time I was new in commodity market so cant able to discuss more. because he has better experience then me.

Finally, I have Done with my Technical Analysis on Natural Gas.

I have Observe Natural Gas having Head and Shoulder pattern on daily charts.

So, I told to my friends sorry but im totally opposite from you im heavily bearish I tried to explain the reasons.

Because ,Price action was totally different then fundamental projection. Market price was saying totally different picture.

I always respect the market. Because Opinion often go wrong ,but market is not.

After that I was busy in my Job and activity in between  once I asked my friend Sir, If you have any Report on Natural Gas

He Replied me we will give you after wards.

Natural Gas Stayed in range bound of 170-195 Rs. and attracted many Small trader.

Because Trading in range and earning is too easy. I have Seen many traders made good money.

They have made 100 % -200 % on margin of natural gas. Its Margin was 10000 rs only and Lot size is 1250

So, If I get 10 Rs hike I can make 12500 Rs. Double and triple  your money.

They all have same Fundamental view in mind We have to buy Natural Gas in any dips.

In Between I hold to my views still looks bearish we have head and shoulder pattern which itself reversal pattern.

And Finally, we came to December month come. In December called heavy Winter month in US and normally  Natural Gas Price will rise in this season.

And opposite  happened Price finally breakdown below 170 mark.. at 165 My friend told me we are long we will add more longs on dips.

At 150 Its too cheap We are highly bullish down side is too limited and upside much more.

In that Fall, People lost whole money what they have earned in last 6-8 months and they all were under margin call Max trader cut the position in losses.

Now,Still  My friend was  highly bullish hold long try to mange some more funds we will have 20-50 % return on this commodity.

And in January News comes This time we may see delay in winter and weather is not so much cold  and price drifting lower and lower.

Then I gone through some fundamental why all are attracted to NG I have read in many article  Cost of Production on NG is $ 5.5 .

But all major US producers have hedge their position by shorting in market. Price was below production cost .

Natural gas continue to trade at 10 year low below 2 $ and MCX Price below 120-110 levels. 

Month by Month Roll over cost was increasing I told to my friend are Get out from this we still not looks market has bottom or any reversal

And I asked to my friends what does mean if production cost is below market price If  Ng is Too cheap are you going to Sell  all your properties or you can take loan for buying Natural Gas.  If there in no Risk then you can He told me no yar I will not. Yar, Risk is always there.

Means I asked to my friend where in Risk Management. Where is you stop loss. what is your strategy? 

You can imagine the roll over cost and loss when you have heavy position 

And In April News Comes NG Inventories highest in 5 year

Funny, But after that he was out from market. and exited around  lows.

Market is market Price movement  is discounting before the news.

In end of april I told to my friends Dont know but Looks like we have nice long trade setup develop  Because it trading above 50 EMA and All indicators are in buy mode and we have strong +ve divergence on Daily Chart.  Means price making lower low but RSI not making higher low.

I replied good long trade is started He told me he is out for a while And tragedy NG is trading at 151 and up 50 %  from last month low 100 Rs.

I might also go wrong But I know my Stop Loss. So overall trade setup and trading can increase my profit.

So, Technical Analysis Give me risk management and  can trail my Stop Loss.  But Fundamental fails to give me that answer.

I have started my Journey from fundamental  and ended with Technical Analyst.

No matter  you are fundamental or Technical . only matter Returns. I feel more comfortable with technical in trading and investing.

Hope you get moral of  the Story i.e. Risk Management

I will post some recent examples with chart how markets are behaving or indicating earlier and discounting any events.

Till Now Happy Trading and Investing with Proper Risk Management