Momentum Trading With A Time Stop

Long/Short Natural Gas

Big Picture

• MCX Energy Index has made a breakout from its monthly and weekly pivots , Commodities in general have made breakouts to the upside

• MCX Natural Gas current condition is volatile up• This price action reminds me of G-Man’s Pullback trade and

levels which comes for potential resistance in the uptrend are 395, however I have identified short term resistances 345-362 where supply “might” come in which also happens to be target 1 if G-Man was trading it

• Daily 14 day volatility is greater than 20 day volatility average & 250 day weighted average which means the current environment has above average volatility and with ADX above 25

Intraday Fundamentals

• A report from the U.S. Energy Information Administration on Thursday showed that supplies of natural-gas in underground storage dropped to 1.686 trillion cubic feet for the week ended Feb. 7. That’s the lowest total storage level since the first week of April 2013, and it’s also the lowest storage figure for the second week of February since 2004.

• “The market is now being pulled by extremes and by a lack of visibility into the June situation,” said Richard Hastings, a macro strategist at Global Hunter Securities. “What if the forecast is wrong, and colder weather persists into mid-March? What if June heats up too much, too fast?

• “The severe winter of 2013-2014 has put the natgas trading market into a stretch, pulled from both directions and exposed to uncertainty risk over a big time horizon,” he said.

Technical Analysis

• Updated weather forecasting models indicated that a strong winter storm was set to sweep over the northeastern U.S. on Tuesday and bring strong winds and fresh snowfall.

• Price had rallied to 4% so chances for pullback were high that is why we witnessed volatility between traders from different timeframes competing.

Trade Management

• Bid at 340.6 and made few cashflow trades i.e. made the market by putting bids and offers apart from the core position, covered the core by offering at 343.3

• Hit the bids at 342 and covered into the down spike by providing liquidity by bidding at 340.5

• Bid at 339 and offered at 340• Offered more at 339.7 and covered by bidding at

339.1• Stop Loss buy order at 341 was filled , covered

few minutes before close at 341.7

Intuition

• NO

Review

• I did a good job in identifying the momentum coupled with reading the tape.• I had violated a time stop because bids were strong indicating no need to exit at

that point• I need to be quick in entering orders , I can get better fills if I am a little more

quick.• When a spike occurs lighten up , I did – Good job • The spike occurred due to a large sell order , I noticed offers build and I did a good

job hitting the bids at 442 instead of offering , I would have missed the trade otherwise, I lightened up at the down spike around 440.5 even before my time stop

• I had put a SL buy order above ATP , previously when I was long I offered infront of ATP as there was a lot of supply , second time the time was closer to closing so volumes filled me in above ATP and I exited before the close

• Good use of different order type, Overall I am happy closing net +ive• I CAN IMPROVE EVERYDAY - Observe , React , Adapt & Evolve