A Solid Opportunity in Energy

Precious Metals have soared. Copper has recovered. Stocks have done well. Emerging Markets have performed fantastically. Agriculture commodities have performed better than anything in the past four months.

Is there any opportunity out there?

We are finding the best risk-reward in the energy sector. Energy commodities typically lag the other commodities initially but outperform later. Precious Metals usually recover first followed by Base Metals. Energy is a late-stage performer. The sector began to outperform in 2004-2005 after the metals outperformed from 2001-2003. Could we witness the same thing in late 2010 and 2011?

Our first chart shows both Natural Gas (UNG) and Oil (USO). Natural Gas could be putting in the right side of a major long-term double bottom. Meanwhile, Oil has essentially traded in a range for 12 months. Oil looks like it is just starting to breakout.

natural gas

Let us not forget Uranium (URPTF), which had a brutal decline (similar to Oil) from $140 to $40/lb. After successfully holding the April 2009 bottom, the spot price of yellow cake has soared about 30% in the last several months.  The price graph is from U3O8.biz.


We should also note that according to sentimentrader.com’s public opinion poll, only 52% are bulls on Oil and only 39% are bulls on Natural Gas. As you’d expect with the under-performance in this sector, the public is hardly overly bullish.

Which of these energy commodities offers the best opportunity? We gave the answer in our first issue of our new service, Commodities Premium. Read about the new service and get a free 14-day trial!

Jordan Roy-Byrne, CMT


Disclosure: No positions.