Natural Gas Futures and the UNG ETF may have bottomed

There exists a possible buy trigger in the UNG ETF at 6.40 or higher.  Natural gas futures have a nice 1 year consolidation pattern on the longer term chart and the recent multi week up move initiated itself after a very convincing looking monthly reversal hammer.

I think it is possible that the mega bear market in natural gas futures is over for now.  Most other commodities have been trading higher for quite some time now on improving economic ‘fundamentals’ (ie. higher demand coupled with commodity scarcity).  It would seem to make sense that the factors that have made other commodities shoot dramatically higher would also eventually have a positive effect on natural gas.

The decline in 2008 was so fast and so deep that it is only natural to expect a 1 year bottoming process.

naturalgasfutures20110104

For the longer chart to remain bullish, natural gas futures need to hold ground at 4.6 or higher during January 2011 and ideally we would see it trade at 5.00 or higher on a monthly closing basis for stronger confirmation that the bottom is in.

This is not the first time I have attempted to call a bottom in the UNG ETF or the natural gas futures.  In all my previous attempts we never had a very strong reversal signal and we clearly did not have enough price basing action.  But now we have this very convincing falling wedge pattern, the low of which shows a very convincing looking long legged reversal hammer.

ung20110104

So the UNG ETF looks quite good at 6.40 as a buy trigger to move higher from here.  The volume yesterday in the UNG also helps as a clue that we could exceed 6.40 in the days/weeks ahead.

Posted in Commodities, Commodity ETF
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2 comments on “Natural Gas Futures and the UNG ETF may have bottomed
  1. Geoff says:

    Tom

    on a completely different note. back in late August you had a write up on ARMH. i have been watching it sporadically. over the intermediate term (last 4 months) it has done well. but if i go on Yahoo Finance and poke around about it, the analysts that follow have target prices on it at 10 or 11 which is almost 50% of where it is now (21). the stock sells for 7 times book value. what are your current thoughts on this stock? good call on the breakout and move from about 17 to 21.50, but what now?

  2. Tom says:

    I think not enough upside left to warrant a good risk reward… I wouldn’t chase it now even though it can climb a bit higher…

    http://www.bestonlinetrades.com/20110105/armh-is-a-monster-hyper-momentum-stock/

    ARMH may be a good buy after the next correction in the sp500 possibly from 1300 range.

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