UNG / UGAZ Update

It's amazing how the little things can tell you so much about a stock/market if you know what to look for and are looking for that which the crowd missed which usually means thinking outside of the box, outside of the normal technical rules and outside the normal technical indicators and their settings.

Last week on Monday, Aug 25th I put out UNG / UGAZ Position Update which acknowledged the multiple stages UNG/UGAZ have gone through, the building and completion of a base that can support a move to the upside of some significance, but also,

"There's some room to add here which I'd consider doing on some gap filling as the lateral base area has a lot of chop and several gaps so a long position here if you don't have one and are interested, is still very much within reason and possibility."

And then we had a follow up Tuesday, Aug. 26th, UGAZ/UNG Position Update:

"The UGAZ long position is up about +12% and technically UNG is still in the base area and hasn't moved to stage 2 yet. There are some near term signs building that a gap fill(or perhaps more, but I don't have evidence for any more than a gap fill at present) is building. The way you look at this scenario is totally a function of your trading style as the 60 min charts in UBG are leading positive so the highest probabilities are to the upside, that doesn't mean on a shorter term basis that gaps can't be filled."

At the time UNG's daily chart looked like this... And one of the signs that it would likely pullback, giving anyone interested in a UNG/UGAZ long a second chance was the base itself as I posted in the same post linked above from last week and right under this chart from that post...

 "in what is best described as an "Old School" double bottom or "W" base, which are the type that use to fall short of testing the previous base lows, this is not the typical double bottom base / W base now as the second base low almost always performs a head fake and runs stops below the previous base lows (*That's the "Or something larger" scenario mentioned above that I have no evidence for, other than the fact it didn't happen)."

The point I'm making in this excerpt is there was evidence for at least some gap filling and "maybe more", but I didn't have specific 3C evidence for "something more" than a gap fill at the time other than the fact that this "Double Base" or "W" base normally would have run stops on the second test of support, which it didn't, this is how older double bottoms use to work and how you'll see them in older TA books, however Wall St. is all too familiar with what Technical Analysis expects and the head fake/shakeout of long stops below support is the new norm,  THAT'S WHAT WAS MISSING.

Below we have the UNG chart (Daily) as of this morning...

As you can see UNG made a breakout from the base area, yet still never ran stops below support,  this makes for a perfect small head fake move to send UNG lower as we were already expecting early last week. It's the new breakout longs that are caught at the yellow arrow and when price drops, their stops which are typically just below forMer resistance (which became support on the breakout) are hit causing more supply and prices to drop faster. 

*THIS IS ONE OF THE MAIN FUNCTIONS OF THE VARIOUS FORMS OF A HEAD FAKE MOVE, TO CREATE MOMENTUM WITHOUT EXPENDING ANY ASSETS OR SELLING THEIR OWN ACCUMULATED POSITION. The concept of this kind of head fake move is best summarized as , "From a failed move, comes a fast move", in the opposite direction of course.

So it looks like we'll get our UNG/UGAZ entry at better prices and lower risk and we also have a higher probability now of the target area being somewhere below the 7/28-7/29 Tweezer Bottom support level, essentially another head fake move that runs out all stops, lures in shorts and creates the same upside momentum as prices cross back above resistance and trigger short stops, again the concept is the same, "From a failed move comes a fast reversal" or you might think of the first head fake as a bull trap and the second (assuming we get it which I think is a safe assumption) a bear trap.

As far as UNG's charts, 

 We still have excellent evidence for an eventual UNG / UGAZ upside move and the larger the base is the more upside it can support so we'll see what this looks like in a few days. The probabilities are also on the side of UNG making a strong upside move and the current pullback resolving as a great entry.

As far as targets, the evidence we didn't have Monday/Tuesday of last week for a pullback larger than a gap fill and more like a double bottom head fake is now clearly there. The breakout above the rectangle base last week was in to distribution, meaning it was VERY high probability a false breakout/head fake and going to create enough downside momentum for a move below the stage 1 double base (stop run)  so that's our new area to set price alerts for, that's where we'll likely find our entry which is a strong entry with low risk. The longer charts like the one above this tell us that the probabilities strongly favor an upside resolution as soon as this move is down.

As I said, I'd set new price alerts below the tweezer bottom from July, < $20.59, but I'd keep an eye on price action for any strong evidence of a lateral turn.