It's Thursday and 10:30 brings the EIA Natural Gas report which looked like this today...
Released On 5/2/2013 10:30:00 AM For wk4/26, 2013
| Prior | Actual |
| Weekly Change | 30 bcf | 43 bcf |
The expected injection was 30 BCF, so we saw nearly 50% more than consensus injected in to storage, obviously that's going to send UNG down.
For newer members, we have been following UNG for well over a year when it was still trending down and we knew something was special about this one so this is a long term long position for many of us and even though it's still in its base area, many of us have a +40% or more profit here.
Lets take a look, see what is going on in underlying trends, whether the EIA report was leaked, I didn't have a chance to check it yesterday with the craziness in the market (the EIA nat gas and petroleum reports use to be the most consistently leaked and allowed us to front-run the reports by a day from 3C signals).
The bottom line is we are at the mercy of the market as to "when" to buy/ add to or expect a legitimate shot at a stage 2 breakout in to mark up.
Weekly UNG chart and one of the obvious changes in character.
The daily: "A"=the base, "B" the head-fake false breakout leading to "C" a "W" bottom accumulation zone to make a real try for a stage 2 breakout and "D" what we knew at the time (and even took profits) to be a false breakout as UNG was already too extended to make a Stage 2 move without pulling back and gathering strength.
My Crossover Screen to avoid false cross-overs or whiplashing, note the 3 indicators all fire a long call at the white boxes which happens to be the second bottom of the "W" base and followed by a +35% move over the next 2+ months. As many of you know, the first pullback or two are to the yellow 10-day price moving average, subsequent pullbacks are deeper to the blue 22-day price moving average. RSI is giving a sell signal here, but the other two indicators are holding up so it is not confirmed, but a warning. Long term I think there's little to worry about.
The yellow vertical area is the strong breakout that we actually took partial profits on that very day as 3C showed it to be a head fake and the trend was already too extended without a rest by the time that move above the breakout area was made.
The red arrow is a little concern for a move below the 22-day, it is possible and still not cause a problem, but I'd like to see UNG close at least at the 22.
The daily Trend Channel holds the entire trend from the base until today, but as you know I've been using the 2-day trend channel which I feel is more appropriate for this type trade, the stop is below $21.95 on a closing basis, but I'd give it more room if you view this as a long term play as I do.
ATR has increased with the trend which is good for the most part, today not so good.
Resistance is still $23.40 for a stage 2 breakout.
This is my "Big View" version of 3C, it is not meant for intricate signals like yesterday's in the market, it shows the flow of major underlying funds. Note the first head fake which we knew at the time at the apex of the triangle where technical traders expect a breakout any way. That pulled back to our "W" base which saw strong accumulation and the last head fake breakout was the strong day we took profits (partial) on.
The indicator below you may remember, my MACD Heat Map. To the left the red box shows momentum fading for a reversal, divergences in the Blue are early warning, by yellow they are serious. In green an example of a positive divergence, in white an example of a cycle from negative to positive and to the right in red an example of a negative signal, this works well and actually can be used as a complete trading system including partial profits, entry and exits.
Today's 1 min 3C shows accumulation in to the move intraday, this is a start, but not a signal.
The 5 ,in shows the head fake breakout, why we took profits there and that the leading negative 3C divergence and price have regained "Reversion to the Mean", which is a good start.
This is the 2 min chart, still negative. The 1 min is positive. You know the routine, reversals are a process, not an event and evidence of that process is migration of the divergence from the fastest 1 min chart to the longer charts like 2, 3, 5, 10, 15, 30 and 60 min.
The market will tell us when it is safe and a high probability area to reclaim those shares we took profits on.
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