Natural Gas Looking Super Bullish

I think natural gas is getting ready for a nice bounce over the next few weeks/months. I think UNG (nat gas ETF) could retrace up to $41-45.

It looks like a 3-wave decline has unfolded from the July peak. Price has carved out a brutal and extended correction with few bounces. However, notice that WaveC formed as an ending diagonal. Volume has been dropping throughout WaveC and MACD is showing strong positive divergence.

Also, COT data shows that commercial traders are extremely long natural gas. See this link for a COT chart (select "Natural Gas", "Commercial Hedger", and "Two Years" in the drop down menus). They are more net-long than they were last winter when price started it's strong spring rally.

There could be one more low, but I think if price rallies above the upper descending trendline, it will head up to $41 or even $45.


Anonymous said...

are you planning to buy UNG at this level. will it go further down?

Narayana said...

I think the safest bet is to wait for price to close above the upper descending trendline. It could make another low, but I think the odds of a strong bounce are higher than the odds of continued decline

in the mountains said...

great find, Narayana! Ending Diagonals (ED's) are one of the best and most reliable indicators for a low risk, high yield trade. I will watch this one and buy soon.

Good point about waiting. Sometimes I think I have the ED count right, but I find that one of the waves was actually longer than I counted it. Also, the 5th wave in the ED (or wave "e" if using letters) often overshoots the trendline, offering a great place to buy (or sell if the ED was the end of an up-move).

Have you looked at silver, SLV etf? Looks like an ED just completed, and I missed the breakout. I am waiting for a 50 to 60 percent retrace of the recent up-move before taking a small position.

in the mountains said...

PS I could miss out on silver, the retrace so far is 37.5 percent very close to the 38 percent Fib. retracement. That may be all we get.

Narayana said...

SLV's move looks like 3-waves up. Perhaps it's not down dropping yet?