Wednesday, January 25, 2012

UNG Chart Request...

We've been following some very bullish underlying trade in UNG for quite some time. My personal opinion is that the news that the US Geological service's report that essentially said that "Fracking" had a connection to earthquakes was initially a bad news catalyst for UNG, but longer term, especially if legislation comes out of this, it could lower the supply of Natural Gas, causing a price increase.

In any case, last week I posted several times on UNG as well as follow ups this week, that there was an evident change in character in the stock and it i the small things like these changes that we need to pay attention to.

 The increasing downside volume culminated on Friday with what looked like high volume capitulation , the following day we saw a doji star candle telling us downside momentum had faded, then Monday we had a nice advance of 9% on heavy volume with a close near the top of the day's range while the market put in a doji star that closed in the middle of its range, UNG was certainly outperforming and disconnected from the market as well as its industry group , Energy, which left a tail on its daily candle showing higher prices had been rejected in the main Industry group, that was also the high for XLE as UNG has continued higher. These are the changes that are subtle, but often are big clues. Today thus far we are on track for another high volume day, the close will be important.


 Look at the change in the long term trend on the 60 min chart, which went quickly from a positive relative divergence to a strong leading positive divergence in a matter of days, that's fast movement for a 60 min chart and would imply heavy accumulation.

 The 15 min chart shows more detail and the accumulation really picked up toward the end of December.

 The 2 min hart, likely market makers or in this case specialists as this is a NYSE stock, appear to have stocked up for what they saw as an impending move higher.

 Today we saw good confirmation on the open, but since it's shown some profit taking, this is a 1 min chart and doesn't compare to what we are seeing on the 15/60 min charts which are much more important, but this may give us a good idea of what is happening in the short term.

Yesterday we saw some resistance at the 10-day moving average which has been resistance for quite some time, as UNG approaches the 22 day average, you can see a small upper shadow on today's daly candle as it backs off from the intraday highs as well as a small gap from the 11th. It is rare to see a "V" reversal, I can't rule it our because UNG has had plenty of time to be accumulated and may not need a base, but if I had to bet, I would bet on a pullback to form at least some small base.  Before adding to UNG, I would wait for today's close and see how it does at the 22 day average, if it busts through on heavier volume then we have recently seen, it may be entering stage 2 markup, if we see a long upper wick on heavy volume, I'd bet on a pullback and we'd want to watch that pullback for short term accumulation to buy the next leg up.

In short, I'd show a little patience and let UNG continue to tell us what its intensions are.

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