If you are following the UNG/DGAZ position, I think we are at a crossroads, there may be a little more upside on an intraday basis for UNG, but I really like where it is now. I've been playing the UNG pullback with DGAZ, I can add to that position a bit in thee trading portfolio, but would rather keep some dry powder for other opportunities. I'm going to go ahead and open a UNG February $22 Put position. As I said,
I also like DGAZ long for this trade (swing most likely), it's just a matter of where to allocate resources and I already have a nearly full size position in DGAZ (long) in the trading portfolio.
The only wild card and why you may want to wait, especially if you are on the fence, is tomorrow's EIA Nat. Gas report at 10:30, it could create some volatility that is helpful in entering a position or it could change things entirely in which case I'd have to close these down, but I think UNG has discounted the Polar Vortexes already.
The H&S set up hear is classic, in fact as a trading concept with H&S tops, there are only 3 places I'll short them (Never below the neck line-too much risk), UNG is at the 3rd and last place I'll short a H&S top which in this case is not large and I think severes as stage 3 for a stage 4 decline which is just a deep pullback.
The H&S in UNG on a daily chart, you always need a preceding uptrend to have a real H&S top, I see people make this mistake all of the time when a H&S pattern shows up in an down trend.
The 3 red arrows represent the shoulders and head, the yellow represents the text book H&S short and because of that, Wall St. almost always knocks those shorts out with a volatility shakeout back above the neckline as you see to the far right,
this is the last place I'll short a H&S top (the first is at the top of the head, the second is the top of the right shoulder). Today's candlestick almost looks like it could be a bearish engulfing pattern which is a bearish downside reversal.
It looks cleaner on a 60 min chart. The idea is shorts are looking for price confirmation so they chase price as it breaks the neckline putting a stop right above the neckline and they get shaken out 90% of the time, that's why the concept is there, it happens so often.
This is the 1 min trend from right shoulder to accumulation at the bottom of the decline under the neckline for the shakeout and what looks to be the end of the shakeout.
5 min chart showing the same signals from the brreak of the neckline lows.
10 min chart of the entire top.
By the way, NG Futures have the same charts (confirmation).
And DGAZ's 10 min leading positive like UNG's 10 min leading negative as DGAZ is a 3x inverse or short Nat gas.
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