You are not a buyer when LNG rises 6 fold

Continuing on from the previous post,

Take a look at the Platts JKM (the Liquefied Natural Gas “LNG” benchmark price) chart below.

This is a weekly chart showing the JKM now trading at 3.5 standard deviations above its mean and 280% above its 200 week moving average.

When coupled with my other indicators, this all adds up to an ‘extreme’.

Note the rare occasions when prices touch 3.5 standard deviations and the subsequent mean reversion.

Mathematics and probability suggest not entering a new ‘long’ position at these moments in time.

This study tells you to not chase prices higher. It’s a sellers market.

Buying should’ve been occurring through 2019 and 2020. You would’ve been buying in the range of $2.50 – $4.50. At that time, the 200 week moving average was hovering at a lofty $7.00.

……and then you hold and twiddle your thumbs.

Heck, it only took 2 years to make 6 times your money.

Today, we see traders buying and playing in the stratosphere displaying an inability to “buy straw hats in winter”.

Inversely, LNG producers should be selling or locking in future prices.

LNG prices are blinking an interim peak and suggest a meaningful mean reversion.

Natural Gas is close to doing so too…..

more on Nat Gas in the next post

September 29, 2021

by Rob Zdravevski

rob@karriasset.com.au