Sunday, December 27, 2015

Natural Gas ($NATGAS): Let's relax now and take it easy

Natural gas has had a stupendous seven days or so. It recently bounced off of a long term line on the weekly chart and appears poised to be making a wave seven retracement to $2.60. Indicators such as RSI on the (5) and (14) week period were both heavily oversold. The MACD and TRIX indicators are also putting in higher lows and what appears to be a double bottom.
The daily charts are showing a different picture, however. Stochastics across most periods are already overbought (highlighted with red circles). The EMA(13) didn't stand a chance but it closed on the 23rd right at the EMA(34) where I expect this 'pause' will materialize into a retracement.
Last week's ATR level at $1.96 was also smashed showing we are in a new trend, however this weeks ATR levels are $2.30 (which seems a little far away) and $1.90, which I think will be support. I've also drawn into the RSI(5) indicator what I expect our fall to look like as a strong 'buy' signal needs to be produced in order for this trend to be validated. In the coming weeks it should descend into the heavily oversold area but as a higher low. If not, this new trend was merely a false start and we go back to waiting.