UNG/DGAZ Update

Friday in the UNG / DGAZ (long trade) update I said...

"Depending on how aggressive you are as a trader, UNG should see a bit more of a bounce and DGAZ a correction, I'm not going to get that aggressive in trying to trim around the bond and I'll leave positions the way they are."

You may also recall there was some talk in that post and analysis of the H&S top in UNG and Inverse H&S bottom in DGAZ and whether this bounce would act as the typical H&S top shakeout that we normally see associated with larger tops, which also happens to be the third and last place I'll short a H&S top, after the initial break under the neckline (Friday) and after a volatility shakeout of all new shorts on that initial break with a move back above the neckline where all of their stops are.

I'm still waiting for data on whether there's confirmation or distribution as it is early, but from Friday's post which is linked at the top of this one, the size and shape of the divergence/reversal area didn't look so large as to be much more than what was expected on Friday and even though I could have traded around it, I decided, as you'll see in the post, just to leave it alone and wait through it. I'm not sure what you did if you were in the trade, but we'll try to pick it up from here and it may in fact be a good entry in a short period of time in to DGAZ (long) if you missed the original idea and are interested.

So far from what I can see, it looks like a few stops have been hit just above the neckline, but nothing huge.

I still think the position is fine as I thought it would be on Friday, I'll show you why again.

 UNG daily H&S top, very small, but we still have the same volatility shakeout concept just barely in play with a move across the neckline where short (buy to cover) stops would be placed.

This is the move intraday on a 5 min chart so you can see the volume and roughly what a stop run would look like, not too impressive.

This is a fair representation of the divergence, it goes out further than 1 minute, but this is a good representation of the process.

 This 10 min UNG chart is what I'd call ""The lid on a bounce", it's negative and the reversal area was not that big nor the divergence, I doubt very much it was intended to be anything more than what it is or what we expected. I think there's still going to be a significant move (pullback) in UNG and up in DGAZ.

This is the 15 min DGAZ positive, it goes out even further, so there's a large process in place, again I think this is more evidence that this move we saw coming on Friday is about what we expected and whether you chose to trade around it or not is more of a personal decision than anything.

I'll update when I have more on today's intraday action.