A 10% Intraday Profit: My High-Conviction Trade is a Hit

Hi, this is Vijay Bhambwani.

I'm back with you again to talk about something that I have got a lot of feedback from my viewers.

I remember sending out a recommendation, a very high conviction recommendation, on natural gas short sell.

I gave out the idea that natural gas typically tends to peak out around Christmas or New Year and by the time you have the vernal equinox, which coincides with our Holi festival, the festival of colours, when the summer really sets in, natural gas prices tend to come down very, very sharply.

I remember recommending a short around 200 to 225 with a possible target of 125 to 150 rupees.

There is a lot of curiosity. There are a lot of questions that I have been forwarded by my viewers and subscribers as to what is happening to natural gas and whether my high conviction trade actually failed.

The answer is not as simple as a yes and no. So let me elaborate upon that.

Natural gas was supposed to have gone up around Christmas, which it did, but because there was a huge overhang of a supply glut, it did not really go up to 220 to 225. It retraced from far lower levels.

Secondly, in the beginning of January, you saw an escalation of fears of the Coronavirus because of which, countries basically started clamping down on travel plans.

So you can imagine the number of barrels of crude oil which is required to be burnt in an airliner travelling from Europe to Southeast Asia. If so many airlines cancelling out so many flights, the consumption of crude oil falls.

China itself clamped down on factories. People stopped coming out of their homes and went out only on an SOS basis. So personal consumption in CNG and LNG powered cars, heating purposes, etc, actually reduced.

The Chinese demand, which is by the way substantial, fell so sharply that the Chinese were actually forced to invoke the force majeure clause, which is unforeseen circumstances. They refused to lift deliveries from their suppliers. That escalated the problem of an oversupplied market.

The other news that hit natural gas prices was the announcement by Dubai and Abu Dhabi of a new find of natural gas. If you were to understand Middle East politics, in June 2017 the Saudis, the Kuwaitis, the UAE countries, and Egypt, placed a military embargo on Qatar.

Qatar is, quite simply, the numero uno in natural gas producers. So in order to wean away their dependency on Qatar, the Dubai and Abu Dhabi governments have now announced their own find of natural gas, which already adds to an oversupply market.

The Russians have announced, along with Germany, the commissioning in 2020 of a pipeline from Russia to Germany carrying natural gas. Here again, you have another factor which tells you that natural gas supplies are likely to spike even higher.

The demand in Europe is witnessing another shock. There has been up to 30% reduction in natural gas off take in many countries for reasons which have told you related to Coronavirus as well as the economic downturn.

So natural gas consumption is going down on one hand, on the other hand, the output is rising sharply.

If Iran is likely to find any resistance to selling oil, it's oil in the market, being a very heavy weight producer of natural gas, it will try to basically raise revenues by substituting natural gas sales with crude oil sales. That adds to the pressure all over again.

So, no. My recommendation on natural gas has not been changed. As a matter of fact, even the Indian government has sent out feelers to the Qataris, who happened to be a major supplier to India. The Qatar National Gas Company, called RasGas, has a tie up with the Indian company Petronet LNG for selling natural gas. Petronet LNG basically imports it in LNG format, liquefied natural gas. It then re-gassifies it in gaseous format and then pumps it through the pipelines of GAIL.

So the Indians themselves are basically renegotiating the contract because the natural gas market so is so heavily oversupplied.

Is natural gas still the trade of 2020? My answer is yes.

Would I like to sell at current levels? Probably not. I would wait for a pullback and then have high conviction short in place.

Weekly Cash Alerts subscribers as well as the Fast Profit Report subscribers will naturally receive updates from me in due course.

But the high conviction trade of 2020 still remains natural gas and by extension, crude oil. My reco still remains in place and I'm monitoring the geopolitical situation at the ground level as keenly as ever.

I am very happy at the kind of feedback that I am receiving for my videos. Guys, please keep the feedback coming. Otherwise I feel like I'm talking to a brick wall.

Before I sign off from this video, let me remind you to click like on this video if you're watching it on YouTube.

Do not forget to share this knowledge with your family and friends and in the comments section, please tell me what you think of this video and what future videos you would like me to make for you.

This is Vijay Bhambwani signing off for now. Do take very good care of trades and investments.

Thank you.