NATURAL GAS BREAKS OUT -- NAT GAS STOCKS STILL LEAD ENERGY PATCH -- EOG HITS NEW RECORD -- APACHE MAY BE NEXT

NATURAL GAS BREAKS OUT... I've written several articles lately about natural gas stocks taking over leadership in the energy patch. That's because the price of natural gas is starting to play catch-up with the rest of the energy complex. Last Wednesday, Arthur Hill wrote that the United States Natural Gas Fund (UNG) was on the verge of completing a "double bottom". Chart 1 shows that bullish event happening last Friday. The gray solid line on Chart 1 is a ratio of the UNG divided by the crude oil ETF (USO). The natural gas/crude ratio has been rising since the start of 2008 after falling throughout 2007. The bullish breakout in natural gas is giving a boost to energy shares today. Not surprisingly, most of the energy stocks hitting new highs are natural gas stocks.

Chart 1

NATURAL GAS STOCK INDEX HITS NEW HIGH... Chart 2 shows the AMEX Natural Gas Stock Index (XNG) hitting a new record high today. The rising ratio below the chart is the XNG divided by the Energy SPDR (XLE). That ratio started rising last October when nat gas stocks start to show new energy leadership. Chart 3 compares the XNG breakout to the XLE and the Oil Serice Holders (solid lines). Both of those indexes are still well below their December highs.

Chart 2

Chart 3

EOG HITS NEW HIGH -- APACHE MAY BE NEXT ... Last Tuesday, I showed upside breakouts in Devon Energy and EOG Resources. EOG is today's top energy gainer (Chart 4). Other natural gas stocks that I've shown recently that continue to hit new records include Chesapeake and XTO Energy. Chart 5 shows that Apache is the next natural gas stock poised to hit a new high.

Chart 4

Chart 5