Readers who follow our work will know that we are advocates for investing in out of favor stocks. Many times, the problem with investing in ultra oversold stocks is timing. Value investors know that patience is key as many times the respective investment can take months if not years to recover.
The flip-side of the above scenario though is that the investment never recovers. Then instead of having researched or invested in a value play, the risk is that one could have actually invested in something known as a value trap. Many times, these companies can go bankrupt which basically leaves the investor with nothing to show for the initial investment.
Investing in Instruments such as commodities and ETF’s protect against any bankruptcy. A commodity such as gold , oil or natural gas can never trade at $0 as they all have intrinsic value. Furthermore the probability of an exchange traded fund which holds a basket of stocks going to $0 is also practically zero when you think of the diversification in those funds.
One such commodity which we have been watching carefully has been Natural Gas. The commodity continues to drift lower as it seems to seeking out a daily cycle low if not a more broader intermediate cycle low. The lower it goes, the more potential we see in this asset class when the commodity turns in earnest. Therefore from this standpoint, let’s have a look at the its charts to see how they have been cycling. We will start off with the long term monthly chart.
Read the rest of the mid-week report here