UNG - tag category postings

I am still watching the Natural Gas Contract fairly closely.  I thought originally that Natural Gas Futures would trade down near the 3 level as a final bear market low.  But there are a few elements in the current chart that have me at least considering otherwise at this point.

The the weekly chart of Natural Gas is used along with the Bollinger bands it paints a possible picture of a large W bottom forming with the Bollinger bands serving as support.

I recently just read over John Bollinger’s book on Bollinger Bands and he indicates through his book the identification of W bottoms along with the Bollinger Bands as confirmation.

He indicates that one might at first see price move out side of the Bollinger bands to create the first portion of the W bottom, then some type of rally can occur and then a retest of the Bollinger Band that does not break through the second time.  the second retest is also typically right portion of the W pattern before the new uptrend emerges.

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This may be one of the most important posts I ever write.  Well, actually scratch that… this may be one of the most important precursor posts I ever write to the eventual ‘signal’ post that I do on the UNG natural gas ETF.

As of the date of this post, it is clear to me that the current most recent trend is down in natural gas futures.  The recent natural gas inventory report that came out last Thursday at 10 am helped to kick off another bearish leg down in this all to abundant element.  But my take is that there is a lot more to the story than that.  There is a larger chart structure that may provide some significant clues as to what natural gas will do in the future.  More on that in a moment…

But first I just think it is really fascinating how Natural Gas Futures have been behaving for the last year.  It seems to have a completely independent mind of its own and could not care less what oil, gold, or the stock market is doing.  This is an important fact and one of the reasons why I like to keep track of what it is doing.

Why? Because it can provide a potentially completely different and much better risk reward setup when most other securities and indexes are all doing pretty much the same thing.  That trading dynamic is my favorite one because it potentially allows you to participate in a brand new trend that is in a completely different trading cycle than everything else.  It allows you to completely separate from what 90% of what everyone else is doing.

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I continue to be long the UNG natural gas ETF since I first mentioned going long at 9.38 on December 8th.  Despite all the negatives you will hear on stock message boards and elsewhere about how no one needs Natural Gas anymore, the chart is quite compelling to me.  There is so much negativity on this ETF right now that just based on that alone it is at least worth a look.

Did you know that if the Dow Jones Industrial Average was up the same percentage amount as the UNG ETF was on December 10th, 2009, the Dow would have been up about…

787 Big Dow Points in One Day!

So my point is that the market is always throwing you different pitches, each with a different risk reward.  Where the risk appears to be the highest it is often the least, and where the risk appears to be the lowest it is often the highest. 

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Despite my previous post talking about UNG needing until end of year to get a reversal going, I am seeing enough right now on the daily chart to try going long UNG again at 9.38 with a stop at 8.96 which is just below the super high volume gap up day.  It seems like a compelling setup and relatively low risk/reward type setup.

I have noticed a couple of 2B buy setups on the chart and combined with the daily macd histrogram and the super large volume buy day the other day I am willing to bet that UNG has a more important bottom here. 

It could still be choppy for a while but this just seems like a good trade here.  Almost everything else is overbought out there right now.

The chart is showing a small broadening wedge pattern near the double bottom retest and we may trade up to the top of that range combined with hitting the 50 day moving average before getting some kind of downward consolidation.

The cold weather spell out there seems to be helping support the UNG ETF as well .

The UNG Natural Gas ETF long term monthly candlestick chart looks good for a possible real longer term reversal starting in January 2010.

The current monthly candlestick on the UNG ETF is shaping up to be a bottoming tail and I think it is a good idea to keep an eye on that monthly candle as December 2009 comes to an end.

I don’t think the UNG ETF will be able to break above the down trend line resistance significantly until January 2010, but whether it does it in December 2009 or January 2010 is irrelevant at this point.  If it achieves that then it is signaling a possible major trend reversal and possible extended new uptrend.  I am viewing 10.20 and higher as a key level to sustain

The monthly MACD continues to slow in bearish momentum and I suspect it will be ready for a bullish cross going into January 2010.

So the UNG ETF could very well be an outstanding core type trade within this key time frame.  The daily chart has down that the UNG is forming a more complex double bottom formation.  I suspect that the UNG will continue to play lots of head games down in this range until it gets enough of a launch pad to get the new uptrend going. 

This is definitely a slow cumbersome process but I believe a 2010 trend change of some sort is at hand.

I have to call the UNG double bottom a failure at this point.  Only 4 days ago the price bar had me thinking it was a confirmed double bottom and UNG was ready to rocket north in swift fashion.

But instead UNG has broken down badly again and today busted support on substantial volume.

I don’t know if UNG is going to make a more complex bottom here or just keep breaking down now even lower.  But today’s action does not inspire much confidence that a firm double bottom will stay in place.

UNG seems to be behaving in almost opposite fashion to most other markets these days.  For example the SP500 has repeatedly evaded sell signals and bearish divergences and UNG has repeatedly evaded buy signals and bullish divergences.

So it seems the lesson here is to respect the previous trend as much as possible and as long as possible until you have much stronger signals of a confirmed trend change.  So it may not be a bad idea to wait until we see an actually monthly bullish MACD crossover before thinking about playing the long side on UNG.  Until that happens it would appear that the sell side is still much too strong.

I talked about the UNG ETF several other times and at this point I am going to just have to put it in the freezer for while.  The trend has been relentlessly bearish.  I thought a couple of weeks ago that the UNG Natural Gas ETF would be able to get some sort of spike rally higher based on the monthly chart because there were some weekly divergences building and the monthly chart was showing at least some promise of a reversal in August.

But as of today the chart looks weak and horrible.  Today and yesterday we briefly broke under trendline support and may warn of an impending break below which could be really bearish.

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Ok well I am a bit disappointed in the way UNG played out. UNG stopped out today right at the close at 12.90 for a loss of 7.06%.  I suppose it is better to be stopped out right at the close of the day than to sit on something like UNG overnight.  This was a violent in your face reversal. Wow.  The chart above shows a clear birds eye view of what is going on with UNG.

The left side of the chart is monthly price bars.  You do not have to know much about technical analysis to know that this chart depicts a crashing price and severe price weakness. But the interesting part is the most recent monthly price bar that has a little yellow arrow pointing at it.

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The word is that the commercials have been accumulating natural gas futures for a record amount of time (source: Jake Bernstein) as the price of Natural gas has been plummeting.

Amazingly the UNG natural gas etf managed to break DOWN through this triangle at these bear market lows for the contract.

So what now? Well I can tell you that the picture is still mixed and no real trade that I can see here yet.  However there is something to be on the look out for on the UNG ETF price chart.  What I am on the lookout for is a ‘busted pattern’ setup that could form over the course of the next month or two. This is a developing story and will follow up with it if I see confirmation.

A ‘busted pattern’ is when you see price break out of a pattern (for example symmetrical triangle) and then, instead of price continuing in the target direction of the pattern, price reverses back up (or down) and then does the complete opposite.

I believe the busted pattern setup would be activated if we see the natural gas etf get back up to the apex of this triangle near the 15 level and then break through the down slanting trendline that makes up the top part of the symmetrical triangle.