swing trading strategy at 10:30 on Thursday
Ok, I have been studying the trend of Natural Gas for a few weeks now and found a quick way to "theoretically" make a quick buck. It's theoretical because I've only done it on paper never with real money.
The two stocks in play are HNU.TO
- Horizons NYMEX Natural Gas 2x Bull and HND.TO
- Horizon 2x Bear. (just remember U for Up and D for Down)
These two ETFs track NYMEX natural gas so it's the leveraged version of UNG
. It's similar to FAS/FAZ for natural gas instead of financials.
An important fact is that every Thursday at 10:30 AM the EIA (Energy Information Admin) release the storage of Natural Gas in America for the week previously. here
The storage is MATERIAL information to the price of Natural Gas. If supply is high then the price will decrease and vice versa.
What I find is that exactly at 10:30 AM very Thursday when the storage information comes out, it causes the prices of HNU and HND to swing wildly in opposite directions.
What I propose is this:
At 10:29 AM, put a 1% TRAILING STOP LOSS BUY on both HNU and HND. A trailing stop buy will execute when the price goes up.
At 10:30:00 AM information is release.
Only one of the TRAILING STOP BUY order will be filled because these ETFs move in opposite direction. Once one order get filled you can close the other.
Here is a real life example for last week:
Thursday June 18, 2009
At 10:29 am the prices of
HNU - ranges from $7.49 to $7.51
HND - ranges from $8.41 to $8.43
Suppose we put a trailing stop buy for HNU at $7.58
and a trailing stop buy for HND at $8.51
At 10:30 am EIA release the following:
The storage of Natural Gas increase by 114 billion cubic feat. This increase is a larger increase than the previous week. Supply is UP! Price of NG will go down. Therefore good day for bear HND.
At 10:30 am prices of both HNU and HND swing like a mtf as expected with this information.
The trailing stop buy of HND gets executed at $8.51.
HND ended up closing on June 18 at $9.05 and high of $9.07. That's a profit of $0.54 (6.3%)
! Not bad for a day of work.
Of course, this is just my theory and it will only work if the trailing stop order gets executed at our price.
I went back to see whether this theory hold and it held 7 out of 8 Thursdays.
I'm interested to see anyone willing to try this strategy next Thursday.
Long term I'm bullish on Natural Gas.