Natural gas in storage rose two billion cubic feet in the December 7 week to 3,806 bcf. A small withdrawal was expected.
It's not always the news, it's the reaction to the news. I would consider this report slightly negative as a draw was expected and we saw a gain in storage instead, but the initial reaction in UNG has been favorable, price has also been sitting in a favorable area for such a reaction (we do have to remember it is very early and these reactions can change).
UNG's Ascending Triangle Base. Since Technical Analysis became popular during the late 1990's as more and more people started managing their own portfolios through the internet and cheap online brokers, it has changed a lot; the reason is with all of these people using Technical Analysis it became very easy for Wall Street to predict their behavior, to actually influence their behavior. One of the things that changed was how bases and tops form. For example consider a "W" bottom base, according to Technical Analysis handed down nearly a century, the second bottom of a "W" base should not fall as far as the first bottom in the "W", in effect the second bottom is stronger. This changed with Technical Analysis becoming popular and now it is most common to see the second bottom in a "W" base to make a new low, this is because Technical Traders have not adapted to Wall St. using T.A. against traders. The net effect is, traders believe the "W" base is a failure and sell their positions right at the bottom, some even go short only to see the base breakout to the upside from there and this is only possible because technical traders follow the handbook to the letter and Wall St. knows that, they know how to get those shares cheap.
Essentially the same thing appears to be happening in UNG, although the base is an ascending triangle so support is a rising diagonal line.
After a few failed breakout attempts (that were too early in the base's formation, the last failed attempt caused a fast move to the downside that broke support just like in a "W" base. Remember the head fake rule, "From a failed move we get a fast move/reversal), so with the pattern being very close to finished, a shakeout move here is not unusual.
Recently it looks like the downside momentum has been stemmed and UNG is ready to either make a small base before reversing to the upside or it could treat the break below support as a head fake move as well and just move up quickly as it moved down quickly from the last failed upside breakout.
Here's a 5 min chart of today with the 10:30 EIA Inventories report, you can see the movement and volume at the report's release, I don't think it was an especially bullish report, but initial reaction in UNG has been favorable. Remember this, "It is not the news, it's the reaction to the news that is important".
The 2 min chart very positive in the area where downside momentum has been stemmed.
This is the intraday chart and positive divergence at the lows on the EIA report.
This is a 60-min modified Trend Channel, basically to change the dynamic and character of UNG we need a move above the $19.90 area, it may be a little lower if it takes more than half a day. Once this change of character appears we can expect a change in trend.
Bottom line: UNG was always meant to be a long term long position, it was always understood to be in the process of creating and now finishing up a base and bases as well as tops are always the most volatile stages among the 4 stages of a trend. I still love UNG , even here.
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