Trade IDea: Filling Out DGAZ Long Trading Position

So far what I've expected to happen which is a multi-year concept, not anything specific to UNG, has occurred and I feel comfortable filling out the DGAZ trading position which is close to full size any way.

You might get a gap fill and a little better position, but because I'm not using options as the tool (using DGAZ long), a slight savings is not as important to me as filling out the position and moving on.

 The main idea on this chart (UNG daily) is that there's a small H&S top pattern which I think is part of a reversal/pullback in UNG, it shouldn't effect UNG longer term as it is a long term long position, but for trading purposes, this is one of our textbook concepts for trading H&S tops.

I've already used volume and 3C analysis to confirm the characteristics of a H&S top. From experience there are only 3 areas I'll short the price pattern, at the highs of the head, the highs of the right shoulder, (unlike what Technical Analysis teaches I WILL NOT short the break of the neckline which is considered by TA as H&S confirmation) and then after initial shorts are sucked in, time after time we see them knocked out of the trade as they place stops just above the neckline, as the market creates a "volatility shakeout" with a run back above the neck line (taking out the new shorts) and creates a sort of head fake move which we see in the yellow box.

Additionally from a daily candlestick perspective, we knew UNG's shakeout was in the area for a reversal as a move just above the right shoulder tends to get all of the stops, the Dark Cloud Cover (bearish reversal ) was formed yesterday and followed up today with a gap down. It is the gap in which you may find a slightly better entry in the inverse, DGAZ which may be filled.

 I suspected yesterday's EIA Natural Gas report would be the final event before we were ready to proceed and even though we had a record drawdown, I suspected that the head fake move itself was the discounting of what was bound to be a strong draw on the EIA report, thus it becomes a "Sell the news" event.

 This is the full H&S on a 30 min chart, 3C is negative through the top, but not horribly so, which fits with a UNG pullback rather than a severe distribution event, it's still tradable in my view.

The shakeout move to the far right saw slightly higher prices, yet a lower 3C reading which helps confirm its head fake character.

This is the actual shakeout move from below the neckline and accumulation to feed the move to the actual move and distribution going in to Wednesday and certainly on yesterday's report (you may recall I had decided to wait for the EIA event, not because of the uncertainty effect, but because I felt it would be a better timing marker so I can get the best timed entry.

DGAZ has a strong leading positive 10 min chart so all in all, it should make for a decent Swing-type move (long).

I'd say the probability of a gap fill in both UNG/DGAZ from today's gap is about 70%.