Tuesday, November 10, 2009

UNG - Possible Double Bottom (Or Worse)?

Folks, UNG is just getting abused again and is approaching the double bottom (possible dead cat bounce) that few saw coming. I did not see it, but I was warning about the position of the weekly indicators and how I doubted further strength. I am not covering futures, contango, supply, demand (or lack of demand), the weather or any EIA reports that can be found HERE. You need to look into all of that stuff before investing. Lets dig into the charts and see what we can find. I can promise you this, the charts appear to be broken.

NATGAS v. OIL Comparison monthly - First a quick look at the decoupling in the price of NATGAS to OIL. Quite clear in the chart. Although NG has made up some ground, Oil is acting like a scorned woman running the other way as fast as possible. Notice the role reversal where NG used to run away from Oil. NG has broken back into it's historical channel. The candle last month with the long upper shadow was bearish and the bears are controlling the ball this month as well. The indicators on this chart are mixed with RSI, CCI, ROC and TRIX going to the red team, and  RSI and MACD going to the green team. It is possible that this is an ABC corrective and we're entering B down which might retrace 38% to 4.65 (which it has done) or to 50% at 4.26 or 61.8% at 3.88. Will it be able to stay in the channel?

UNG 30m Chart -  This is where things get a little screwy. Just follow the two blue and one red vertical lines on the chart and you tell me if this is broken or not? Under $11.00 I do not understand any price action. No indicators are responding in any sensible form at this time. Sure a nice fat divergence to price is being set by RSI and the others, but come on. It is like price and the indicators decoupled. I have seen this on charts before but rarely. Only two possibilities, big upside or more drastic downside.

UNG 60m chart - OK, let's try the blue/red line trick again on a longer time frame. BUSTED again. The divergence in RSI is pretty impressive and would indicate a possible booster rocket is under UNG when/if it gets to the double bottom. What bothers me is what happened in the pink box at the last bottom. CCI took a strange turn for the worst after giving some reliable bottoming signals. If that happens here (see NATGAS chart above) the low for NATGAS around $2.25 might get tested and UNG continues to get hammered. If not and the divergence holds, UNG could pop right back up to the 12.10 area.

 UNG Daily chart -  OK, it gets more interesting here in the daily chart. The S Sto is the most reliable trading indicator here (although it is getting stomped right now like a bug). The divergence in CMF is impressive and if a divergence should show in RSI, the UNG bugs will be happy little critters. CCI appears to be dead, but it is approaching a lower pink bear market floor line that has produced bounces in the past. Volume decline here is very apparent. NOW, I'll point you to the possible H&S pattern that has a possible right shoulder forming with a target somewhere near $16.

UNG Weekly chart - OK, notice RSI in this chart appears to be turning at the lower red trendline (blue arrows). Volume decline is very apparent and decidedly red. S Sto has been a reliable indicator here as well and it does not look like it has any intentions of turning soon. It could whipsaw, but looks like more downside to come. The other thing here is the LT downtrend trendline (thin black) is just under price. Is this going for some sort of proper backtest of that trendline?

My call: It is quite apparent someone wants NG dead and they are doing a good job at killing it. Betting against or on something that is determined by a contango forward pricing action is nuts, so not matter what you do KEEP YOUR STOPS TIGHT. I'm guessing upside yet, but possibly soon. Starting at the double bottom you need to have your orders on the launching pad. IF the daily S Sto breaks up out of the embedded mess it is in, that will be a clue as well. On the weekly chart 5 red weeks in a row has not happened, 3 and 4 are common, but not 5 (we're in the 5th week now). Also on the weekly chart the turns in the two RSI's has my interest up a little. The divergence on the 60m RSI is important and possibly (usually, but maybe not in this case) a good tell a turn is coming. Other items in the charts look good as well, but there are also some discouraging items. If the H&S on the daily chart plays out that would be a great thing. We'll have to see. So, be patient. Let the play come to you. One last thing, you may have to make this bullish play in the face of P3 coming down. I also mentioned the lower low on the NATGAS chart around $2.25 and the possible B corrective of NATGAS above, so be careful, busted charts of manipulated commodities can be tough to get right (LOL).

I just thought I would trow this out there - from my November 4th UNG post - "So, the 60m chart says go. The daily chart says it could go, but most likely will not for a while. The weekly chart says if it does go it won't go anywhere and it should not be going anywhere anytime soon anyway. The monthly chart (the first natgas chart above) actually looks good except for that hook in RSI. This is possibly a nice big dead cat bounce and might just set a double bottom, but that is still to be seen."

Remember because certain assholes exist on the web, I have had to turn on comment moderation, so please be patient in waiting for me to reply. I'm working on getting Disqus set up which I believe everyone will appreciate.

GL trading.


  1. hi shanky, girlwholovesshanky here.... I think your ung analysis is exciting and excellent, just like you....

    golden even...... lol....

  2. you know I need moderating..... lol....

  3. when are you getting disques?.... I have pics for you........ lol....

  4. and no I'm not in my cups...... burp.... lol...

  5. Hey sweetie, working on getting Disqus right now, I am having lots of troubles. They say I need to change templates and are little help otherwise. K was little help also. You into the grape juice tonight?

  6. I'll love you with or without your disques... cranberrio out.... lol...

  7. what does shanky's crystal ball say now? gotta respect UNG approaching lower boll band on the daily. could be a nice bounce. thinking of picking up some calls soon myself...


  8. I'll update this or do a new post this weekend - news this AM was bad but got ignored. I may get into the water soon.

  9. Do you think that a double bottom occured today?

    UNG didn't cross below 9.00 today. The low volume lately and the regular slope down of NG spot price made me wonder the same thing: a possible double bottom. I found your post search for possible clues on this. Thanks for your post.

    I expect that next week will know. UNG must return to at least 11$ soon to confirm a double bottom.

  10. OB - Very possible - I'm gonna post on UNG this weekend. Thanks for the visit.


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