Natural Gas Hoisted by Technicals

Everything's become a technical trade nowadays. Natural gas is no different; in fact, it has been trading entirely technically recently. I think that will continue to be the theme going forward, so I remain entirely bullish on natural gas here despite an incredible case for the contrary.

You couldn't find a more bearish case for natural gas prices if you tried. And I have been an advocate of the position that, at least compared with crude oil, natural gas has been a lot closer to following the fundamentals.

And the fundamentals are all bearish when looking at natural gas prices.

The global recession has destroyed demand.

New technologies have boosted supply of natural gas to historic levels, and new pressure technologies have made old finds new again -- as with Marcellus shale fields in New York and Pennsylvania.

Why I'm a Natural Gas Bull

Recent finds in Florida and the Gulf of Mexico when developed will add even more supply possibilities to a domestic market already drowning in natural gas.

You should expect natural gas, then, with such overwhelming supply and demand negatives, to continue to sell off -- but instead, we've seen a very nice rally in natural gas prices and the curve of prices indicates that the market will be headed higher in the future. I'm on board with that idea. I don't think natural gas, despite the bearish scenario, is done rallying and therefore neither are natural gas stocks.

How can I say this? Natural gas in U.S. storage for the week ended Sept. 18 stood at 3.525 trillion cubic feet, very close to the all-time record for nat gas storage of 3.565 trillion cubic feet, set in October 2007. That's 17% over the storage numbers we saw last year at this time.