I already decided I have better things to do than chase trades up and down on every move in UNG and DGAZ like watching over this move we have been hunting, managing the positions that were put in place and keeping an eye on the horizon.
I think DGAZ will ultimately be fine. I don't think the CME hiked Natural Gas margins twice in a week as a result of Natural Gas (UNG's) volatility for it's own sake, I think this was more political with unprecedented polar vortexes covering the nation, I think the last thing the government wants is for speculators to create a frenzy in Nat Gas during this economy. Ultimately I don't think this is bad for UNG long term, it has been building a solid base on solid fundamentals, a momentum-minkey chasing spike isn't the long term move and structure we want in UNG, we want real support built in for the long haul as it has been doing, not a speculative blow-off. In any case, my point is I think the CME move was pushed from political avenues more than their own margin requirements.
As far as the charts, I'm going to show you the UNG intraday charts and then the same chart in context and we'll end with DGAZ.
This 1 min UNG chart almost had me in panic mode before I took a step back. This does look like an intraday move higher off a "W" base much like what we saw complete in the market yesterday, except that was over a period of days with a large week long range right before it, this is over a matter of 3.5 hours.
This is the exact same 1 min chart zoomed out to context, now that 1 min chart looks a lot more like what I think it is, a common bounce as UNG has had a couple of rough days and formed a little base. Remember that a base tells you a lot about how much the proceeding move can support.
Again when I was just looking at intraday charts, UNG's 2 min confirms accumulation at the second half of the ":W" base, it's almost a spitting image of the market except on a much smaller scale (that's the fractal nature of the market because all timeframes are still dominated by the same things that move the market, emotion).
The same 2 min chart in context, the negatives are huge and deep, this is almost like a bottle rocket, perhaps a quick move and a sharp pop, but not much else.
By the time I got to the 3 min chart, the intraday views really had me concerned.
Again though, put the same chart on a wider context and you can see the distribution signals are much, much stronger, the divegrence almost gets lost here. If this were a 4 or 5 day divergence that built up, then I'd look at it much more seriously, but it's several hours.
Then the 10 min chart has no sign at all of any positive, but quite a negative set of signals.
The 15 min chart keeps deteriorating to worse and worse levels.
And I don't need to say much about the stronger 30 min chart, I probably didn't even need to highlight it. So looking at UNG/DGAZ, is it worth trading moves that are a day here and then switching back? For me it's not.
DGAZ's 1 min chart up close confirms the UNG 1 min chart as DGAZ is the 3x short version of UNG.
The 2 min chart is a bit "ify", it seemed to confirm, but there's also a small positive building in there.
The 5 min is clearly positive on DGAZ and I wouldn't exit the position based on this chart, I wouldn't even consider it.
However it is the longer charts that are showing a strong reversal process and divergence in to it like this 10 min chart or...
Or this 30 min chart (recall UNG's 30 min chart-nearly the exact opposite). To me, this looks like one of the better Swing trade (and maybe then some) opportunities.
I still have my core UNG long and I'd like to add to it, a pullback with the trading long DGAZ in place would be appreciated and I think that's where we are headed.
Honestly, right now I'd much rather treat this as a swing type trade than try to trim around fat, there are better assets to do that in.
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