UNG Update

This is a larger Primary Update of UNG from March 5th in which I said, "If you think it's too late to get involved in UNG, you'd be mistaken", however I added that UNG is not the typical trade, this is a longer term trade, more like an investment and risk management must reflect that, it needs room as it is about to come out of a large base, but for now it's still in the base and bases like tops are volatile. It has still been worth playing though as many of us got involved at the lows and have a 30-40% gain and this one hasn't even moved to mark-up yet.

This morning UNG is up on a gap and up more on the 10:30 EIA Natural Gas Report in which there was a slightly larger draw than consensus.
"Natural gas in storage fell 145 billion cubic feet in the March 8 week to 1,938 bcf. A withdrawal of 135 bcf was expected."

 Here's the longer term perspective, change of character and base, we started following UNG in anticipation of a base while it was still heading down.

 This level crossed on 3/8 doesn't look that important on a daily chart, but on an intraday chart you can see there were a lot of resistance areas so it actually was an important move, I'm pretty sure I posted about it, but can't find the post right now.

 This shows the right side of the base with a head fake/false breakout right at the apex of the large ascending triangle, 3C shows that it was a false breakout and we suspected back then that UNG would be taken down to lower levels to be accumulated on the cheap one last time before it made a serious run to breakout to stage 2 mark-up. The most recent resistance level broken yesterday, but decisively today was a serious level as can be seen on the daily chart with at least 8 serious points of resistance and a break away gap to the downside, maybe one to the upside if today doesn't get filled.

We have talked a lot about the lack of breakaway and exhaustion gaps in the market, two really exceptional signals that HFTs have just annihilated with relentless gap filling, however as you can see in orange, a not so important gap was filled, but in white, an exceptionally important break-away gap was not filled, this is a VERY bullish gap at the area it formed and the fact it wasn't filled (which makes it a breakaway gap) shows how important that day was.

 The 5 min UNG chart (which is typically the earliest timeframe we see institutional money move, has been nearly perfectly in line with price - that's what we call, "Price trend confirmation".

 The 60 min chart is important as a long timeframe showing larger sums of money moving, you can see the head fake / false breakout in yellow and 3C confirming that with a negative divergence meant to send UNG lower where it was accumulated at the white positive divergences.

 More important is the 4-hour chart showing base accumulation.

As a form of confirmation, I like to check other indicators I trust like MoneyStream, note the almost perfect confirmation of the downtrend, this gives me high confidence in the indicator's readings, then a large leading positive divergence on a very important daily chart as this shows huge accumulation.

 On my X-Over Screen which is a 10 and 22 bar m.a., a custom indicator with a 22 bar ma and 14 bar RSI, all 3 must agree to give a buy/sell signal, red is a sell signal, white is a buy or confirmation signal and in yellow we have a whiplash or false price crossover that the other 2 indicators would keep you from taking.

 Here's my recommended stop, an 8 day that holds the downtrend, note price is breaking above the channel today.

If you are looking for a shorter trading stop to trade around the position, this daily will work, it will keep moving up locking in gains, but allow some room for consolidations. Right now, a 22-day exponential moving average will give you a close approximation of the daily trend channel stop.