Ticker Of The Week: US Natural Gas Fund (NYSE: UNG)
by Jim Stanton, Technical & Quantitative Analyst and Editor of The 1-2-3 Trader
For what seems like an eternity, natural gas investors have waited for the price to form a bottom and offer a solid buying opportunity.
Alas, the United States Natural Gas (NYSE: UNG) ETF has continued to move lower without triggering any buy signals.
UNG reached a low of $11.91 back on July 13 and rallied back up to both the downtrend line and the formidable 20-week moving average this week.
But as you can see below, the bears began selling again as those resistance levels were reached and pushed the stock down over 80 cents on Thursday. Since mid July, however, we’ve seen a series of higher highs and higher lows, which could be a sign that UNG is in the process of forming a bottom.
If You Want To Trade Natural Gas, Pay Attention To These Numbers
When natural gas was trading above $12, there were over 1,600 rigs in use. But now, the count is less than 900. This should eventually create shortages as demand rises, especially since the new administration is advocating cleaner burning fuel.
And when all the traders who are short on natural gas are forced to cover, the price should rise dramatically.
With UNG having made a secondary low of $12.32 on July 29, as long as it doesn’t close below that level, the chart pattern will remain bullish.
If UNG retreats and makes new lows below $11.91, the next target area where a bottom could form would be between $10.80 and $11.10. However, if UNG is able to produce a weekly close above the $14.25 area before making new lows, it should create a very tradable rally.
Jim Stanton
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