Thursday's typical Nat. Gas inventories was pushed off until 10:30 a.m. today, they came in as follows...
| Released On 1/3/2014 10:30:00 AM For wk12/27, 2013 |
| Prior | Actual |
| Weekly Change | -177 bcf | -97 bcf |
|
There was a draw of 97 billion cubic feet, this is below consensus of a draw of -115 to -120.
UNG reacted to the data right away, not how you might expect, but also not very strongly compared to normal volatility on the EIA report.
The charts for UNG are a little surprising, they are very new, but this is why we pay attention to what's going on.
If these charts hold, then I'll be looking for a UNG retracement of a lot less than originally expected, a DGAZ bounce of less than expected and if the charts are not just transitory, then I'll be looking to wrap up the DGAZ long position.
This is the intraday UNG 1 min chart, it went positive at 10:30 on the release of the EIA report and since has lost momentum due to some distribution intraday, however...
There are several charts up to this 15 minute that show UNG is changing, at least it has started to and if it holds, UNG "should" pull back a bit from here and form a reversal process which makes the pullback much more shallow than originally anticipated, but right on target with the typical X-Over screen's second pullback target area as you'll see below.
DGAZ for it's part (3x short Nat Gas) pulled back on the EIA report as it moves opposite nat gas/UNG, and has a confirming intraday positive signal suggesting it move up from here,
this is perfect confirmation with UNG above.
DGAZ 3 min also suggests that it moves higher, meaning UNG pulls back, however with the initial
new 3C readings today, the UNG pullback would be more likely to start forming a reversal process back to the upside rather than pulling back more as initially expected. As I said, the signals are brand new (today) so I'd typically take them with a grain of salt, but they are on some fairly strong charts, out to at least 15 minutes.
Long term UNG (long) is one of my favorite long core positions for the long term, the DGAZ trade is exactly that, a trade and not a long term core position as UNG is.
If this plays out according to today's new signals, this is a perfect example why I am careful not to put too much betting against the strongest 3C probability which is bullish UNG, in this case that means while I'm willing to play the counter trend correction, I'm not willing to go so far as the kind of leverage that UNG puts would provide.
DGAZ for its part today is showing a similar (mirror opposite) confirmation signal of the UNG 15 min positive chart with a 15 min negative. This shouldn't keep DGAZ from bouncing and UNG from pulling back, but it would tell me that the target has to be recalculated and the position likely wrapped up sooner than thought.
This is UNG's Daily X-Over chart. This layout was initially designed to weed out false crossovers or what is known as being whiplashed , it requires 3 signals rather than just 1 (the moving average cross-over that most traders use). However over the years of using it, I have noticed it can also be used as a trading system on its own as the first pullback after a new signal (in this case a new long signal) is almost always to the yellow 10-day moving average as seen at #1 and the second and subsequent pullbacks are to the deeper blue 22-day moving average. So long as all 3 signals stay long, you can treat this as a trending system and either trade around corrections or use them to take profits, add to positions, etc. so it has become a useful trending trade system.
We'll see what the charts do, I don't want to over react, but I suspect even if they are a new dynamic in play, the DGAZ long should still be either profitable or exited near break even.
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