Monday, June 23, 2014

I love the smell of natural gas (UNG) in the morning....but...uh, oh!!!

This is a pre-opening message regarding UNG on the two hour chart. I love following natural gas because it's a natural commodity to make good trades off of. The oscillations are big enough, the trends regular, and as a commodity definitely interesting enough geo-politically to keep me up a night reading!

I've been playing around with the two hourly chart and noticed a few things now that I have drawn in a couple of long(er) term resistance lines. This is a possible scenario for UNG. I have observed the following:
  • UNG seems to be in a "three fan decline."
  • Major horizontal resistance at $25.10 where it currently rests.  This resistance was set by peaks going back as far as March 2014.
  • It seems that just at the time of writing the "bounce" I expected was much shorter lived that I'd imagine and has already taken place on Friday. Not only has broken the ascending blue channel but has broken steeply outside the red channel!
  • The second "fan" resistance was established by another higher low in February 2014 and is around $24.70.
  • The third and final "fan" resistance established by higher lower in March, April, and twice in May and is around $24.10.
  • Because of these resistances the fall forecast by several sources in the natural gas market means this decline should be a protracted affair
  • I expect this red declining channel to widen to show that the bounces along this "three fan decline" could come at higher prices.
UNG at four months.
UNG at six months, illustrating better the "three fan decline."