Three Forces That Could Ignite Nat Gas

Some plays on natural gas include:

• United States Natural Gas Fund(UNG), which enables one to gain access to natural gas through futures contracts. UNG closed at $8.11 on Thursday.
• First Trust ISE-Revere Natural Gas(FCG), which holds 30 different companies that are involved in natural gas. Some of its holdings include Exxon Mobil(XOM), Questar(STR) and Total(TOT). FCG closed at $15.99 on Thursday.
• iShares Dow Jones US Oil & Gas Ex Index(IEO), which includes numerous holdings of companies which are involved in the exploration and production of natural gas. Some of its holdings include Chesapeake Energy(CHK), Devon Energy(DVN) and Apache(APA). IEO closed at $50.19 on Thursday.
• iPath Dow Jones AIG Natural Gas ETN(GAZ), which is an unsecured, unsubordinated debt security that seeks to replicate the performance of the Dow Jones-UBS Natural Gas Total Return Sub-Index, which is composed of Henry Hub Natural Gas futures contracts. GAZ closed at $10.93 on Thursday.

Although an opportunity could exist in natural gas, it is important to consider the enhanced the volatility of the commodity. To help protect against this, the use of an exit strategy which identifies specific price points at which downward price pressure is likely to occur is important.

According to the latest data at SmartStops.net, these price points are as follows: UNG at $7.35, FCG at $15.36, IEO at $48.39, and GAZ at $10.29.

Written by Kevin Grewal in Houston.

Grewal has no positions in the securities mentioned.

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