Today's newsletter marks the first of what may be many discussions on the surging natural gas prices as we approach winter. Over the past week, Natural Gas futures have risen by 8.59%, with the monthly increase reaching a remarkable 31.29%, bringing the year-to-date gain to 18.66%. This sharp rise stands in contrast to the performance of Crude Oil, which has seen declines of -4.55%, -11.37%, and -4.49% over the same time periods. Mergers and acquisitions (M&A) activity is also fueling momentum in the natural gas subsector, with notable deals such as Tourmaline's acquisition of Crew Energy, Paramount's transaction with Ovintiv, and Canadian Natural Resources' $6.5 billion deal with Chevron in the gas-rich Duvernay. This wave of activity buoyed by improving commodity prices has sparked renewed buying interest in select names within the otherwise sluggish energy sector, including Cheniere Energy Inc. (LNG). Cheniere, the largest player in the liquefied natural gas market, has seen its shares climb from $50 to $175 in 2021, despite consolidating sideways over the past 18 months. However, with rising natural gas prices, Cheniere's shares have been climbing, now valued at just over $210, with resistance levels extrapolated at $228.63 and $242.63, based on a vertical point and figure count. The company’s strong relative strength is further confirmed by its perfect SMAX score of 10/10, reflecting its outperformance against other asset classes in addition to the stocks in the SIA Russell 1000 Index Report.
Additionally, Cheniere’s previous consolidation zone, which is now providing support, highlights key price levels (green lines) at $195.14, $180.28, and $173.28. Beyond the positive performance in natural gas prices, a significant shift is also visible in the Point and Figure chart, where a trend change from negative to positive has been identified. These charts, which automatically track trends in the SIA platform, offer valuable insights into changing market sentiment, particularly when breakouts occur above or below key trend lines. While energy remains an SIA Unfavored sector, the performance within the natural gas sub-commodity is noteworthy, and further analysis will be provided in upcoming reports. Additionally, it's important to monitor drilling stocks, as they tend to have a higher correlation with natural gas prices than crude oil. As highlighted in the Daily Stock Report on November 12th, Baker Hughes (BKR) was identified as gaining relative strength and may warrant a re-read in the context of today’s broader natural gas market developments.
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