UNG / DGAZ

Long time members know how much I like UNG as a long term long position, I almost always have a UNG long open because of that, but last Friday I made a difficult decision in deciding to close the entire UNG core long position. It turns out, that was the right call as UNG was down -5.67% yesterday.

 This was Friday's (2/21) UNG exit of the entire core position to protect gains at 30+%. I also have a DGAZ trading position open (3x short Natural Gas) on a UNG pullback play.

After yesterday's near 6% loss in UNG, it's not uncommon to have a correction or bounce, I think this may be an opportunity to enter DGAZ as a trading position or perhaps a UNG short or put, although I hate betting against UNG, but I do think it is just getting started on a larger pullback.

This is UNG's 1 min chart, there's a positive divegrence on the open which is not unusual after the beating it took yesterday and the price pattern is a small bear flag.

 This divergence stretches all the way out to the 5 min chart, there hasn't been enough time for this to become a very strong divegrence, but the time that there has been available for short term accumulation has been used well so it's this counter trend correction that provides the opportunity to enter DGAZ at lower prices (lower than yesterday's) or to enter a potential UNG short/Put.

 The stronger 15 min chart has a much bigger and longer term negative divegrence so this is where the probabilities ultimately are, no matter how much UNG might be able to gain off the 5 min positive above, it should still resolve to making a lower low as this 15 min chart is negative, stronger and that's where the probabilities are stronger.

 If that's not enough for you, then the resistance that is clearly shown on a 30 min chart and leading negative divegrence which is the reason I closed the long position near the highs Friday, should be enough to give you confidence in buying DGAZ weakness near term or shorting UNG strength.

 DGAZ's 60 min chart confirms UNG's 30 min above with a positive divegrence, this is where the longer term probabilities (on a swing or longer trade) are.

The 30 min confirms as well

 The 5 min is showing a negative divergence on the gap up open which confirms the positive divergence in UNG on the 5 min gap down open as the two trade opposite each other.

 There is a small 1 min  divergence that opened negative and has gone positive on the pullback, I'm not sure if this is just a small intraday divergence or if it will migrate to the 2 min chart below which shows no positives yet. If it starts to migrate to longer term intraday charts like 22 and 3 min, then we know that the time to enter DGAZ long or UNG short will be very soon, if it fails then we know it's likely that DGAZ will pull back some more and UNG will gain some more before they make for good entries which would actually be a better entry.

It will come down to this 2 min chart later, whether it starts going positive or remains negative. The trade should be available, the question now is just when and at what price level, but I imagine it can't be more than a day or two out at the most.