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Monday Investing Commentary


Oil & Natural Gas Portfolio Recovers After Mid-Week Pullback Following FTK Earnings Miss; Natural Gas Long Position Boosted With Plans For Continued Accumulation On Dips; Crude Oil A Difficult Short-Term Long, But A Solid Long-Term Hold


Monday, August 13, 2018
Despite a small Friday pullback, natural gas turned in another solid week, rising 3.2% to settle at $2.94/MMBTU. Crude oil, on the other hand, continues to trip over its own feet as WTI oil fell 1.3% to close at $67.63/MMBTU, its sixth straight weekly loss. My Oil & Natural Gas Portfolio rose +0.4% on Friday, helping to mitigate a mid-week pull-back and reduce the week's loss to -0.8%. Through the first 154 trading days of 2018, the portfolio is up +17.6%, or +28.7% annualized. I made a total of three trades on the week. The first, on Wednesday, was the complete sale of my FTK long position after another earnings miss for a disastrous 40% loss, a trade that I should have made weeks earlier. On Friday's pullback in natural gas, I boosted my natural gas long position by covering a portion of my UGAZ short position for a +11.2% return and adding to my DGAZ short position. In the week ahead, I will look to continue boosting my natural gas long position on further weakness as the calendar m...

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Mid-Week Investing Commentary

Oil & Natural Gas Portfolio Recovers After Mid-Week Pullback Following FTK Earnings Miss; Natural Gas Long Position Boosted With Plans For Continued Accumulation On Dips; Crude Oil A Difficult Short-Term Long, But A Solid Long-Term Hold


6:00 AM EDT, Monday, August 13, 2018
Despite a small Friday pullback, natural gas turned in another solid week, rising 3.2% to settle at $2.94/MMBTU. Crude oil, on the other hand, continues to trip over its own feet as WTI oil fell 1.3% to close at $67.63/MMBTU, its sixth straight weekly loss. My Oil & Natural Gas Portfolio rose +0.4% on Friday, helping to mitigate a mid-week pull-back and reduce the week's loss to -0.8%. Through the first 154 trading days of 2018, the portfolio is up +17.6%, or +28.7% annualized. I made a total of three trades on the week. The first, on Wednesday, was the complete sale of my FTK long position after another earnings miss for a disastrous 40% loss, a trade that I should have made weeks earlier. On Friday's pullback in natural gas, I boosted my natural gas long position by covering a portion of my UGAZ short position for a +11.2% return and adding to my DGAZ short position. In the week ahead, I will look to continue boosting my natural gas long position on further weakness as the calendar moves towards the Shoulder Season at a 4-year high storage deficit.


With Friday's trades, my net long natural gas trade stands at a modest 4.8% of my portfolio via an 18.8% short DGAZ stake partially offset by a 14.0% UGAZ short position, with this hedging strategy designed to take advantage of leverage-induced decay of 3X ETFs without over-exposing the portfolio either long or short. My DGAZ short is up +18.3% from my basis while UGAZ is up +14.0%. Should natural gas dip under $2.90/MMBTU this week, I will plan to again add to my long position, likely via a short sale of DGAZ, and will continue doing so at 3-5 cent intervals until my net long position reaches 15% should natural gas fall under $2.80/MMBTU. My bullish bias remains driven by the 4-year high--and growing--storage deficit versus the 5-year average as well as a relatively favorable near-term outlook. While the market is indeed loose versus the 5-year average--by slightly over 3 BCF/day by my calculations--it is not loose enough to drop the deficit under -400 BCF, at most, by the end of the injection season. I continue to feel that the calendar gets closer to the heating season, fear and uncertainty will creep into the investor psyche and drive a bit more of a premium. On the other hand, should natural gas rally to open the week, I will look to take profits on my long position should natural gas top $3.00/MMBTU due to the concern that such higher prices may prompt some fuel-switching. At this point, I am undecided as to whether I will flip immediately short for a quick swing trade and this decision will be determined by the determined by the temperature outlook at the time.


It remains difficult to effectively argue the long-side for crude oil. With other countries boosting output, the Brent-WTI spread narrowing which will cap US exports, and the EIA reporting a series of lackluster inventory reports, there is absent a strong catalyst to get WTI prices back above $70/barrel. At this time, my long oil position via DWT is at a moderate 8.0% of my holdings and is still up +10.0% from my basis. I view this as a long-term trade. I can afford a dip oil as, long-term, the inverse ETF short position will benefit from leverage-induced decay. At this time, I have no plans to add to the position unless WTI were to dip under $65/barrel.


Disclaimer: Current Portfolio Holdings are released by Celsius Energy as experimental products. While they are intended to provide accurate, up-to-date data, they should not be used as trading recommendations nor should they be used alone in making investment decisions, or decisions of any kind. Celsius Energy does not make an express or implied warranty of any kind regarding the data information including, without limitation, any warranty of merchantability or fitness for a particular purpose or use. Investing Commentaries represent personal opinions and analysis and should not be taken as investing advice.