NEW YORK ( TheStreet) -- Natural gas prices haven't gone anywhere in 2010, and that has made the sector look a little less appetizing to the analysts recently. I'm going to tell you why this might be the best opportunity you're going to get this year in this sector and where to take your best bets. Natural gas hasn't followed the pattern of crude oil. While prompt prices (future prices closest to expiration) for crude have rallied throughout 2009 and increased their gains somewhat in 2010, now touching almost $82, natural gas has languished this year, starting in January at close to $6 an mMbtu but now closer to $4.50. I've written over and over again about the divergence between these two energy prices and why I believe oil has been financially motivated while natural gas has been adhering to fundamentals, despite similarly well-stocked demand and supply pictures. But no matter what you use to analyze the picture, one thing is clear: With new shale finds and the technology to get at them, we are literally swimming in natural gas and look unlikely to have a fundamental shortage, if we choose as a nation to pursue this domestic fuel. As "natty" prices have sagged, analysts covering the space at the big houses have taken fresh looks at their projections for 2010 and 2011. Both Credit Suisse and Morgan Stanley revised their forecasts yesterday and have changed their targets for companies correlated to price, downgrading two of the dedicated natural gas companies I also follow, Chesapeake ( CHK) and Devon ( DVN). It is hard to argue with their logic. That would mean I am bearish on price, right? To the contrary, I think this marks a great opportunity, although perhaps not with these two specific stocks. You need to get a historical perspective on natural gas prices to even consider what I'm about to tell you, but our domestic fuel has had two very significant spikes in price in the last five years, hitting almost $14 in 2008 and rocketing to almost $16 in 2005. Of course, the picture has changed in supply and technology -- yada, yada. I make light of this because the spikes that we saw in 2005 and 2008 weren't exactly created in the middle of a supply crisis, even if the fundamental picture was different from today.
My point is that natural gas has a history of becoming a "hot trade" that has not required overwhelming fundamentals in the past to get the party started. Any little thing can set off the rush for participation in the space. And from these cheap levels, any incentive from Washington or huge corporate move to convert to natural gas from other traditional energy supplies can be just the ticket to get this moving. You have to buy when no one wants it; that's the trader rule. And nobody wants companies directly tethered to natural gas prices right now. So where do you go? I have been a fan of Devon and particularly Chesapeake, but for various reasons I've been considering swapping out of these holdings into others. Both of these have lost some ground since the CS and MS downgrades, so the timing is wrong for a sale here. I'll wait for a better moment. Still, I am looking at some new ideas: Cimarex ( XEC) is a flawlessly run company, with 1.2 trillion cubic feet of proven gas reserves. Over 2009, it has consolidated away from its secondary oil recovery plays to concentrate more on its western Oklahoma Cana-Woodford shale interests, fast becoming as hot as the Marcellus. It has just reported a good quarter, too. Unfortunately, its stock has been outperforming for a while as well, up almost 17% this year while tracking a pretty straight with a strong uptrend since the lows of March 2009. Still, sometimes you got to buy them while they're going up. I like Cimarex here. Sandridge ( SD) is a big holding of Boone Pickens. I love Pickens, who's historically either very right or very wrong, has been accumulating SandRidge as one of his key natural gas holdings. I'm not crazy about the leadership at Sandridge, which is carrying almost $2.6 billion in debt, but you just can't deny how closely its shares have correlated to natural gas prices. You could use it as a worthy proxy to the United States Natural Gas Fund ( UNG), which I hate as an investment. Sandridge has recently ticked under $8 a share, significantly cheaper than Boone has his shares.
Here's a chance to trade like Pickens and get them cheaper than him. I like Sandridge as a medium-term speculative play on an increase in natural gas prices. Although the analysts are convinced, I am not. Natural gas prices have nowhere to go but up, and I think they are headed there. Now's the time to get involved.