Know This Natural Gas ETF

Oil gets most of the attention, but among energy commodities this year, natural gas not been worth writing home about either. Actually, the performances delivered by some natural gas-related exchange traded products (ETPs) have been downright abysmal.

For example, the largest futures-based natural gas ETP is down nearly 31 percent year-to-date while natural gas equities have not been much better. The ISE-Revere Natural Gas Index is lower by 23 percent this year. In other words, betting against natural gas and the related stocks has been the way to go, particularly with the energy sector being the worst-performing group in the S&P 500.

Enter the Direxion Daily Natural Gas Related Bear 3X Shares GASX. The Direxion Daily Natural Gas Related Bear 3X Shares attempts to deliver triple the daily inverse returns of the aforementioned ISE-Revere Natural Gas Index.

Top holdings in the index include Anadarko Petroleum Corporation APC (5.59 percent), Cabot Oil & Gas Corporation COG (5.5 percent), Devon Energy Corp DVN (5.43 percent), Noble Energy, Inc. NBL (5.36 percent), Concho Resources IncCXO (5.32 percent).

Supportive Data

On its own, natural gas is a volatile commodity. On their own, leveraged ETFs like GASX are volatile, meaning the combination of natural gas and leverage can be either potent or combustible. So the usual disclaimers regarding leveraged ETFs are particularly applicable to GASX. Stated clearly: GASX is not a buy-and-hold investment. It is, however, a potentially rewarding intraday bet against natural gas equities. 

Against the backdrop of continually slumping natural gas prices, the technical outlook for GASX is improving and that is saying something with the ETF up 7.2 percent over the past week.

“We note that the momentum indicators continue to signal a positive trend in the short-term. RSI is trading above the short-term resistance level,” according to Direxion research. “RSI is above 50 and indicative of a trending price development. We would also like to note that the average daily return is positive and above 3 percent over the last 30 trading days.” 

Tread Carefully

GASX has a bullish counterpart, the Direxion Daily Natural Gas Related Bull 3X Shares GASL, which is designed to deliver triple the daily returns of the aforementioned index of natural gas equity index.

It bears noting that, according to Direxion data, it appears traders are throwing in the towel on GASL. In recent days, GASL's volume has been well-above average while over the past month, the leveraged bull fund has averaged daily outflows of nearly $52,000. 

Still, natural gas inventories remain high and production is increasing. The Energy Information Administration said Tuesday it sees U.S. natural gas output climbing more than 1 percent in 2018.

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