UNG Follow Up

As you probably remember I've been expecting a pullback in UNG based on the 3C signals and based on experience with breakouts from base areas. Today we saw what appears to be a pullback under way. Tomorrow at 10:30 we have the EIA natural gas report. The report 2 weeks ago sent UNG up +14.95% in a single day so there's always the possibility that the report tomorrow could send UNG through the resistance area that seems to be defining UNG's base. On the other hand the report could be the catalyst to a deeper pullback.

 UNG could be a possible inverse H&S base; the two shoulders at the white arrows and the head at the red arrow. If that's the case, I'd expect a small pullback, UNG to see strong positive divergences rather quickly in to the pullback and then a move through resistance which would bring UNG to stage 2 mark up and would attract the attention of a lot more traders, which drives price up quickly, that's why it's called "Mark-up".

 This could also be an ascending bullish triangle, in that case the pullback would likely be a bit deeper and I wouldn't expect to see any signs of accumulation initially, but later as UNG pulls back closer to their target zone.

 Today's move saw pretty heavy volume as several areas were stopped out. Note that UNG traded just above the breakout level, I'd expect to see heavier volume as traders buy what they believe to be a breakout.


 You can see that heavier volume this morning on the move above the breakout level to the left, then you can see the morning range's support broken on heavy volume and finally yesterday's intraday high taken out with another surge in volume. It must have been very apparent to the middle men as to where the stops were as they have the book, but I and most of you could have guessed where traders would most likely have placed their stops.

 UNG 30 min uptrend shows distribution at the first approach of the resistance level and again as we moved toward the same area, this is why I expected a pullback and being the signal is on a 30 min chart, I'd expect the pullback to be deeper, perhaps the ascending triangle pattern mentioned above.

The 15 min chart with the same negative divergence. The reaction to the EIA report will give us a better idea of where UNG is headed, but it will likely make for a good buy/add to, unless of course we get another huge day on the Nat Gas report which I feel is not likely.