Tuesday, July 22, 2014

Natural Gas (UNG) flaming out? An examination of the weekly chart.

I knew UNG was going to decline but not with this severity. To this end I have only taken advantage of the first half of this decline with periodic entrances in the second half. No pauses have been taken at intermediate resistance lines which I find quite suprising, in addition to this being a very steep and narrow decline.

I really thought a bounce was in store after last week and the reason was the weekly chart closed outside the Bollinger bands. Almost universally, even with stocks that continue to decline, horizontal movement of the equity proceeds until it is back within the Bollinger bands to continue it's descent. But no - this weeks movement continues outside the bands leading me to believe that my ultimate target of around $16.50 is coming sooner than expected. I imagined this would occur over months, not weeks! We have three important resistance areas until that happens: $21.60, $19.60, and $18.50. These prices may provide pause for UNG's fall enabling the channel to widen before falling again.

Additionally, this weeks band (on the weekly) is completely outside the bands meaning I am betting a that a pause occurs to return the trend to within the Bollinger region next week. 

Just by coincidence we are approaching the lowermost resistance line of my proposed channel which happens to coincide with the Bollinger Band problem. A movement inwards would look like a bounce and UNG is looking awfully oversold on the hourly, daily and weekly charts. 

Jakob Richardson © 2014