This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How Dan Dicker Is Playing Natural Gas

Stocks in this article: COPCHKUNGDVNSD

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.

Speculative Natural Gas Stock

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.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs