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Sell Natural Gas Into Resistance

Tickers in this article: GLD UNG USO
NEW YORK (TheStreet) -- The average retail investor may follow the SPDR Gold Shares exchange-traded fund more than oil or natural gas, but oil is probably more pertinent.

Investors who own a car require very little convincing of how the price of oil impacts their daily finances. You can follow the price of oil through the United States Oil ETF. Even if you don't own a car, it's easy to see how oil prices matter to you. Everything you buy is either made from oil and/or delivered to the store you purchase from.

Both GLD and USO have recently made new lows for 2013. What may surprise you after viewing an oil or gold chart is that natural gas is not only making new highs for 2013, but new 52-week highs, as measured with the US Natural Gas ETF.

If you live in Wisconsin like me, it doesn't take long to figure out why natural gas prices have climbed so high. Normally during this time of April, the winter's snowfall has long melted. This year, we have had winter snowstorm warnings as recently as April 21.

I haven't seen a day yet in 2013 with a daily temperature over 50 degrees. More of my lawn is covered with snow than grass.

If you love summer more than winter, it's downright depressing, but not for the price of natural gas and UNG. The daily chart for UNG says it all. As long as winter will not leave, natural gas prices will not fall; however, time is not on the side of the natural gas bull.


We all know summer will come, but in the meantime, the amount of working natural gas underground storage (short-term storage) continues to decline and is significantly below the year-ago and the five-year average.

Overall, natural gas storage reserves are 32% below last year's levels. This becomes even more compelling when you consider that the overall supply and production this year are above 2012 levels. If you understand supply and demand curves, you realize that prices can remain higher than normal as long as either supply is reduced or demand is higher than normal.