UNG Follow Up

Yesterday this UNG Update was posted. After a move +3.86% higher, many were interested if a pullback was still in the cards to either enter long UNG/UGAZ positions or to add to them.

I covered most of the macro-dynamics of UNG in yesterday's post so I won't repeat that today, but we were also looking at the 3C charts and came to the probability,

"The charts now suggest a resistance area has been hit, remember tomorrow morning the EIA releases Natural Gas inventories...So we are looking for a pullback in UNG once again...

Right now the last pivot high saw minor distribution on a 15 min chart, but as we approach the same resistance level, 3C is not confirming, suggesting all of the gaps recently made below, are likely to be filled in a pullback from here."

Today UNG has started that pullback, down -2.33% and showing positive signals which is what we want to see in to a pullback (institutional accumulation).

The current UGAZ long is still at a 19+% gain, I'm not interested in trying to trade around this one so unless something dramatic changes, I'll just leave it open and treat it as an early trend position.

 Yesterday's daily chart demonstrates the principle of candlestick reversals on higher volume just discussed in the USO update, a concept that is universal through assets and timeframes.

Note the Doji Star at resistance yesterday on increasing volume (churning) which is an indication on its own of a reversal even without the candlestick reversal, but with the candlestick and volume, the reversal's probabilities rise by multiples.

The gaps seen yesterday as potential targets are obvious, there is support (Tweezer bottom) at the top of the orange range, the bottom being a gap fill.

The very same ROC on price principle I talked about yesterday worked just as well for this pullback and is showing positive action in to the pullback as we want to see, but no reversal process yet which should be roughly proportional to the preceding trend (pullback) which is yet to be determined.

Since we have already seen an impressive breakout and consolidation, I suspect we are just about ready to see UNG/UGAZ move up in a much stronger trend and break above the the failed range of January-Jue 2014, thus I'm using a 2-day version of the X-Over Screen which has just given all 3 signals for a new long/buy signal. The first pullback after a new signal is almost always the 10-bar moving average in yellow, thus a 20-day moving average as this is a 2-day chart, this is around our other target areas as well.

At the first sign of a trend, I would continue to use the 2-day X-Over Screen and we'll establish the appropriate Trend Channel stop once a trend is clear.

 As shown yesterday, the 15 min chart was positive at the previous pullback I had warned was coming and would be a good buy area, we also see the divegrence at the resistance area. I fully suspect this 15 min chart will be repaired and positive before a move higher which means some sort of "U" or "W" shaped reversal process, so I suspect we have some time before an upside move, but this may be a good candidate for considering phasing in, not the same as averaging down a losing trade as your risk management reflects the averaging in approach before you enter the first order.

 The 3 min chart shows similar things on a smaller scale, the point being is I expect this will be clearly positive as well by the time UNG is ready for a pullback purchase which is one of my favorite kinds as we get to verify the constructive pullback first, before any entry.

Finally the intraday 1 min is showing a positive divegrence, this is the small process of divergences that accrue and eventually migrate to the longer timeframes above,  so thus far this looks like a constructive pullback being accumulated by deep pockets on the discounted pullback.