NEW YORK ( TheStreet) -- Gold, down 40 bucks. Oil has just given back two dollars and fifty cents. All of the commodity stocks are taking big rests from their recent spikes. We know the story: Profit taking is coming on the back of an enormous 2010 rally in commodities, most strongly in the month of December.
To you traders, I'll suggest that this is an opportunity to get in on a streaking commodity market. But is that opportunity in gold? No, not for me. Perhaps in oil? $89 doesn't represent enough of a pullback to get out the big guns, not yet. Instead, I see an even better opportunity; in natural gas.
There's another story that we have heard so often it hurts the ears: Natural gas is just too plentiful and too few incentives exist to spur the price here. Indeed, the recent run that 'natty' has seen to $4.60 an mMbtu will be explained by the analysts and the media as a quick response to unexpected lower temperatures here and in the Midwest, after which the fuel will quickly settle back to its $4 benchmark or lower.
The natural gas market is about to do what it does best: Make fools out of the conventional wisdom and destroy some more traders' accounts, as it has done with regularity since 2000. Natural gas is about to make a run for a target of $7, and the accompanying stocks are about to outperform in an energy sector where they have significantly lagged. There are more than a few fundamental ideas that could spur natural gas to trade much higher in the New Year. Industrial growth, first forecast at 2.5%, but now expected at a more optimistic 4.5% to 5% for the year, will immediately impact the most elastic fuel out there to take up the shortfall -- natural gas. Also, the fuel has two components: the dry natural gas that we always talk about and the "wet" components, like propane, hexane and pentane that most analysts forget about, but are crucial to the manufacture of plastics and other high-tech materials. According to Glenn Williams, who writes for RealMoney.com and who I trust as the smartest guy on the industrial side of energy, shale gas plays contain much higher percentages of these wet gas components than more conventional drilling sources of nat gas. (You'll have to pay to see Glenn's stuff, but let me tell you -- it's worth it!). These shale plays are going to have profit potential well beyond simple methane supplies.