At any given time, there are a multitude of factors that impact the markets. They are constantly moving and changing. One way for traders to stay on top of this ever-shifting environment is with Leading and Following Markets.
The fundamental concept of this technology is to identify a market that typically moves in the direction of another market, thus identifying a “leading” and a “following” market. By investing in the “following” market, the trader is able to use the “leading” market as a better indicator of fluctuation than the chaotic markets at large.
Using this strategy can make the whole process seem less like a gamble.
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2. Hot Market Report: Natural Gas - Colder weather brings out volatility
By Joe Easton, Senior Broker
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This week’s highlighted Market is Natural Gas futures.
Natural Gas is part of the energy sector along with its cousins, Crude Oil, RBOB - Unleaded gas and heating oil. All traded on the NYMEX/GLOBEX exchange.
Most Winters Natural Gas Futures wakes up from its slumber and provides volatility increasing risk and profit potential. Dubbed the “Widow-maker” Natural Gas has a history of making strong trends with little retrace opportunity to exit wrong sided positions.
This week is another classic example in the litany.
For December Natural Gas Futures, the trend turned after 2 weeks ago Thursday’s inventory report.
We bounced off significant support at $2.296 ( based on the November Contract). . EIA reports often provide additional liquidity and opportunities for market reversals.
In this case we haven’t looked back since. We have witnessed the three gaps “breakaway”, “runaway”, (also known as continuation) and “exhaustion gap”.
The first being $.05 second being $.09 and lastly $.07 respectively. These gaps along with the intraday moves have taken the NG futures from $2.29 to a high of $2.90.
This is a $.60 ($6000 per contract) move equivalent to a 30% jump in value!
Since this recent high we have retraced some to $2.75, however I expect to make another move higher at least to $2.94 and possibly higher. Bulls want to hold $2.67- $2.71.
For full disclosure, I bought a call out of the money with lots of time to give the market a chance to continue the uptrend. Contact your Broker and we can help implement a strategy together.
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Natural Gas Futures Specs. (this market also offers a mini Nat Gas futures contract which is half the size) Hours: 5:00 PM to 4:00 PM the following day, Central Time
Margins: $2700 initial, $2500 maintenance ( as of the date of this newsletter)
Point Value: full point = $100 ( Example: 404.0 to 405.0 ). Min. price fluctuation is 0.1 = $10 ( Example: 404.1 to 404.2)
Settlement: Physical, deliverable commodity
Months: Monthly cycle, All Months
Some of the basic fundamentals to keep in mind when you are considering trading the Nat Gas market:
1. Longer term view of current market prices
2. Supply and Demand
3. Seasonality, i.e. heating and cooling cycles
4. Be aware of Thursday morning’s EIA gas storage report at 9:30 AM CDT
Our brokers here at Cannon will be happy to chat about the Natural Gas market, other energies, other futures, options, futures spreads and much more!
Feel free to contact us at any time.
Disclaimer: This calendar is compiled from
sources believed to be reliable. Moore Research Center, Inc.
assumes no responsibility for any errors or omissions. It is meant
as an alert to events that may affect trading strategies and is not
necessarily complete. The release dates for certain economic
reports may have been rescheduled.
* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.