There’s no doubt that Oil and energy related assets have been a great place to be these past few months, but a lot of the names I follow are hitting my upside price targets left and right. I do believe current price action suggests they may have one leg higher left in them, but I think further upside may be limited as many of these securities approach their downward sloping 200 day moving averages.

I’ll admit, it’s hard to tell if this was the ultimate bottom in energy related assets or if it’s a correction within a structural downtrend, so I may end up looking like a total doofus with this post. That being said, I do tend to lean towards the latter because it will take weeks/months of price consolidation to allow the moving averages on a daily and weekly timeframe to flatten out and begin curling higher. Until we see that happen I think it will be tough to sustain any rallies over the intermediate or long term. Also, despite the recent relative outperformance, I think the weekly charts have a lot of work to do in correcting the structural weakness we’ve seen on an absolute and relative basis for the past few years.

That being said, I think natural gas is setting up nicely on the long side, in similar fashion to what we saw in other parts of the energy market months ago.

First, let’s take a look at the charts Crude and its related markets and outline the what I see as remaining upside targets if prices continue to act constructively.

crude1. Prices flagging above prior resistance at 58.

2. Momentum has yet to hit overbought conditions.

3. Next targets up toward 63, 66, 71 if we continue to stair-step higher.

gasoline1. Prices flagging above the March highs near 1.98.

2. Momentum has yet to reach overbought conditions.

3. Next target at the 200 day near 2.14.

heating oil1. Prices flagging above 1.95.

2. Momentum in bullish range, hit overbought on last rally.

3. Next target at 200 day just overhead & Feb highs of 2.10.

xle1. Prices flagging above the Feb ’14 lows.

2. Momentum has yet to hit overbought conditions.

3. Targets at the 200 day just overhead and 88.

oih1. Prices flagging above 37.

2. Momentum in a bullish range, but is diverging as price makes new highs.

3. Target at 42 which is a gap fill, 38.2% retrace of this multi-month move lower & the 200 day. xop1. Prices flagging above 54.

2. Momentum has yet to hit overbought conditions.

3. Next target at 58 which is a gap fill, the 38.2% retrace of this multi-month move lower and the 200 day.

rsx1. Prices below a the 200day and overhead supply at 20.30.

2. Momentum in a bullish range after hitting overbought conditions on this rally.

3. Next target if we clear the YTD highs is at 22, but with a downward sloping 200 day it’ll be tough to reach.

ewm1. Prices flagging above the 13.60.

2. Momenutm barely hit overbought conditions, still in a bearish range.

3. No further upside targets as we tested prior support & the 200 day at 14.30 and failed miserably.

ewc1. Prices flagging blow the 200 day and overhead supply at 29.50.

2. Momenutm in a bullish range, but diverging as prices make new highs.

3. Next upside target if we do clear last week’s highs is 30.25.

One overarching theme in the energy plays we looked at above is price coming into a downward sloping 200 day / overhead supply and momentum either failing to hit overbought conditions / diverging as price makes new highs. Again, I think this can be corrected through some consolidation at these higher prices, but these conditions signal to me that the risk/reward on the long side is not nearly as attractive as it was in mid March, even if I do believe they’ll see one more leg higher.

Moving on to natural gas…

NG Weekly1. Prices put in a false breakdown below the August ’12 lows and reversed sharply  to the upside.

2. Momentum positively diverged as prices made new lows.

3. The next weekly target is up toward prior support at 3.10. NG Daily1. Prices put in a false breakdown below the early April lows.

2. Momentum positively diverged at the news lows.

3. Prices rallied sharply back toward trendline resistance.

I think this natural gas move is just getting started. I’d like to see prices flag above 2.70 and I’d be a buyer of a breakout above this trendline resistance. I think the tactical upside targets are 2.96, 3.10 and 3.30.

So if you’re with me in thinking that the mean reversion move in Oil correlated assets is almost over, natural gas may be one to put on your watchlist for the next few weeks.

As always, if you have any questions feel free to reach out and I’ll get back to you as soon as I can.

Is Natural Gas The Next Big Energy Trade?