EIA Natural Gas Report

First I should mention that UNG announced yesterday that there will be a 4 for 1 reverse split. I have had some questions about reverse splits, there's not a whole lot of influence in UNG's case, there does tend to be an initial disappointment among investors on a split as I have alluded to earlier in the week, traders feel more empowered owning more shares, but whether you own 4 shares or 1 share is irrelevant, the percentage gain is all that matters. It can be good on several levels, first if UNG were to fall below $5 there would be margin issues that may dissuade some investors. Some funds also have a bias against lower priced stocks, I remember one trader giving an interview saying 'Never buy stocks below $15.00'. In companies that are trading at a very low level there can be possible exchange de-listing ramifications, that would not be the case for UNG. All in all, I would say it doesn't matter that much, but if I had to come down on one side of the fence, I would say it's a slight positive.

The EIA report today was more significant.

Released On 2/2/2012 10:30:00 AM For wk1/27, 2012

Prior Actual Weekly Change -192 bcf -132 bcf

The actual draw was 132 billion bcf leaving supplies at 2966 billion bcf. Consensus averaged a draw of 130 bn bcf, so there was a slightly larger draw then expected which moved UNG today.

During sluggish economic activity, demand for Nat Gas is not expected to be strong, so even a 2 bn bcf draw is seen as bullish for UNG/Nat Gas.

We have had quite a few experiences in the past with obviously leaked EIA reports, mostly in crude as that has been what we had been most focused on in the past. I can't say if this was leaked, but there was clear accumulation of both the recent pullback as well as the lows yesterday.

This large volume spike is exactly 10:30 when the report was leaked, the candle went to intraday lows to a trend moving up, these large volume spikes whether they be at the top or bottom of a trend, typically are a churning, or exchange of shares from weak hands to strong or vice-versa.

 The 15 min 3C trend during the pullback has been leading positive indicating accumulation.

 Here's the positive divergence on a 10-min chart at yesterday's lows

 Relative positive divergences and a strong positive divergence at yesterday's lows and a current leading positive divergence which is stronger then the relative divergences.

And on a 1 min chart, we have a beautiful example of what upside confirmation looks like.