Friday, April 17, 2015

Has the fall of natural gas (UNG) finally ended?

I speculated in my post on Wednesday that natural gas could continue declining to $2.40 except that a catastrophic drop would be required given how little lateral room is left in it's current channel, or it could rise. The break below $13.10 last Friday with it's multi-percentage decline was the first step towards the first possibility coming to fruition. The decline continued at the start of the week but each day that followed the declines began getting smaller and smaller whereupon Wednesday a turn upwards occurred followed by Thursday's huge climb.

What happened on Thursday was a little more important than people may realize at first. I had put in a new diagonal resistance line connecting the series of lower highs since November. A break above this may foreshadow a move outside UNG's declining channel that began back in early November. It's easy to imagine a break from this channel now with lateral space at such a premium. Without extremely large moves downwards the final resistance line will be reached and broken. Today was a decline, which was to expected after Thursday's move upwards, and so I made a speculative long/buy. My bullish sentiment will be furthered by UNG's ability to stay above $13.10 over the next two weeks where I anticipate adding to my position.

The natural gas buying season is typically February to June and we are already two dismal months into the buying period (statically over a 30 year survey). Furthermore natural gas is becoming increasingly popular during the summer months as a larger number of air-conditioners are using gas to run their compressors instead of electricity.

My near term KST indicator is still in a bearish configuration but it has begun to curve up and my momentum indicators have already crossed over. I think this may be a seasonal turning point for natural gas.