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Private Briefingwith WILLIAM PATALON III, Executive Editor
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Chief Investment Strategist
20-year seasoned market analyst and professional trader with highly accurate track record. Specialty in Asian markets.
Global Energy Strategist
35-year expert in oil and gas policy, risk assessment, and emerging market economic development.
Capital Wave Strategist
30-year CBOE trader, market maker, and retired hedge fund honcho. Helped launch the Volatility Index in 1993.
20-year commodity guru and portfolio advisor. Top authority on metals + mining stocks. Head- quartered in Canada.
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30-year veteran of tech markets with a Rolodex of Silicon Valley CEOs. Pulitzer nominee. Uncovered rare earths crisis.
30-year veteran analyst of business, economics, and financial markets. Award-winning author of "Contrarian Investing."
On Saturday, I outlined why natural gas prices were moving up.
Today, let's talk about how investors can make some money off this.
As gas prices inch toward $4 per 1,000 cubic feet (or million BTUs) on the NYMEX futures market, we need to remember that this is not going to be either an accelerated rise or one that will be without volatility.
For reasons mentioned on Friday, gas prices will likely cap out in the mid-$4 range by the time we reach midsummer. Â
That means there are not going to be any across-the-board influences raising the entire sector. This is going to require some patience and selective investing.
So how does one structure an approach to this?
Three overarching considerations must be addressed upfront.
First, the strategy requires some patience. This rebound is not happening overnight.
Second, unlike in other energy categories, there is limited advantage here in the use of exchange-traded funds (ETFs). With natural gas, it's all about cherry-picking stocks, not playing the broad environment of providers.
Third, be prepared to redirect investment.
Staying with selected companies through low periods may work in other sectors, but with gas there is considerable extractable volume to bring to market at any time. While demand is going to be rising in the categories discussed on Saturday, the potential on the supply side will make a "lifting of all boats" impossible.
Therefore, adopt an approach utilizing trailing stops. Select a loss level you can live with (25% or 30% is what I usually use), and sell shares when they reach that level.
These are trailing stops. The stops kick in once the decline has reached the percentage from the share's highest value while part of your holdings. That allows you to retain some profits or at least minimize the overall loss, if the stock has benefited from an improvement.
So, as the natural gas rebound continues, what opportunities should you target?
Here, there are four areas of primary interest. Each requires that you apply the following considerations in selecting investments.
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