Time to RADAR UNG possible BUSTED Pattern Setup

This is an important heads up.

I mentioned the UNG Natural Gas ETF before as having a possible busted pattern setup (See the related posts section at the bottom of this article).  A busted pattern setup is when you see a stock or index have a breakout out of a pattern (for example a symmetrical triangle) in the intended normal direction of the pattern.  But then instead of a continued follow through, the price reverses back inside the pattern for a complete reversal.

By doing so the stock or index is giving the exact opposite signal. UNG is up 4% right now off the bottom.

ung20090722

Based on the chart above a move back inside the range of the triangle slightly north of the 15 area could activate the busted pattern bullish signal here.  There is absolutely no question that natural gas futures and the UNG have been in an extremely bearish trend since July of 2008.  So here we are at the bear market lows.  These types of setups off of major bear market lows can be some of the best setups out there because the first moves off of a bear market are usually the most rewarding.

In addition to the possible bullish busted symmetrical triangle pattern setup, I am also seeing based on the WEEKLY charts a bullish divergence based on RSI.  So not only do we have the possible busted pattern setup developing but we already have a weekly bullish divergence based on the weeklies.

These two factors combined although the first one is not confirmed yet, have me thinking it is not a bad idea to go long right now instead of waiting for the confirmed signal.  I don’t like to do that but the bullish divergence is swaying me that way.

So for the purposes of BestOnlineTrades Record keeping I am going to list UNG as long right now as of 13.88 with a stop right under the minor up trendline that has begun on 7/13/2009, which is roughly 12.80 or about 7% below where we are now.

BestOnlineTrades Recommended List Symbol Date of Rec. Entry Price Stop
  UNG 7/22/09 13.88 12.90
       
       
Posted in ETFS, Technical Analysis
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2 comments on “Time to RADAR UNG possible BUSTED Pattern Setup
  1. Feel Sorry says:

    I feel your pain but you just pulled a Cramer! UNG just dropped from your 13.88 recommended entry and is now 13.30 at 11 am on 7/23/09 with no hope of ever going back up. Win some lose some. But I’ve done far far worse on some of my calls so dont feel bad, i still like your site.

  2. Tom Tom says:

    Well UNG has not quite hit the stop of 12.90 today as I indicated in my post. Although I admit it is very close to that level right now and may hit it by end of day. Will have to see.

    But even if the stop is triggered later today, I still believe there is a long position developing in UNG. The hard part about bear market lows is finding the sweet spot for the true turn around.

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