The charts suggest the natural gas price hike is not over, Cramer says

Jim Cramer of CNBC said Tuesday that the technical analysis indicates that the continued rise in natural gas prices is related to a small squeeze in commodities and that relief could occur, not immediately.

“The graphics, according to Carley Garner’s interpretation, suggest that natural gas could continue to explode for a while, but ultimately he believes it’s the same kind of temporary compression rally we’ve seen in so many other products. basics “. said the host “Mad Money.”

“Sooner or later, bet it will end and prices will go down as fast as they go up,” he said.

An unusually hot summer, in addition to disruptions associated with weather disasters like Hurricane Ida, played a role in starting the natural gas price jump, Cramer said. “However, unless we get an extremely cold winter, Garner believes the market is overestimating the level of demand here with natural gas at five dollars and changing.”

Cramer pointed to a Garner chart showing data from Commodity Futures Trading Commission traders ’commitment reports on natural gas futures, which contain net positions of small speculators, professional money managers (represented by the green line) and trading hedges .

“Over the summer, it can be seen that these money managers took a net short position as natural gas continued to rise,” Cramer said. “When prices moved comfortably above $ 4, they ran out of firepower – there was no one left to sell – and when that happens, prices tend to skyrocket, which is exactly what happened.” .

Then, natural gas prices rose another stage when bearish investors decided to hedge their short positions, forcing them to recover futures at higher prices and adding more upward pressure, Cramer explained.

However, Cramer said that despite his view that compression will eventually slow, Garner still does not believe it is “out of juice.” One of the key reasons is that big speculators have not yet become neutral or clean, according to the latest CFTC data, Cramer said. That’s what it took to end the tight past, Cramer said.

“If that pattern is met, Garner believes natural gas could move toward the highs of 2009 or 2014 … That’s between $ 5.75 and $ 6.50,” before it peaked, Cramer said.

Natural gas futures hit a high of $ 5,369 per million British thermal units on Tuesday, the highest levels since February 2014.

Garner believes natural gas is unlikely to exceed 2009 or 2014 highs, Cramer said, because the United States has not seen anything above those levels since the fracking boom.

“That said, if natural gas breaks down below $ 5 … well, this whole move is over and Garner expects a similar breakdown,” Cramer said. “Finally, he predicts that a new supply will rebalance natural gas [at] almost three dollars. “