UNG Set-up

No matter what I still like UNG, the long term charts which are the highest probability resolution for price are very strong, winter is coming, but as of yesterday's update and the failed August 29th breakout attempt in which we posted on the 29th before we saw the close, exactly what would happen if the breakout failed, has all come to pass and it's wrapped up nicely in yesterday's UNG / UGAZ Position Follow Up. 

The silver lining is that price's position and almost certain stop-run head fake move, present a beautiful opportunity whether you like UNG long, the 3x leveraged Natural gas long, UGAZ or whether you prefer to play call options , buying on the cheap with low premiums in to price weakness, but confirmed underlying strength.

Right now we are "technically" under support, but a head fake move must move emotion, it must cause the desired effect of buying in the case of the failed breakout or selling in the case of a stop run, in these ways they create supply or demand, whichever institutional money needs and they create momentum.

For example, looking at a daily chart of UNG,

 The failed breakout to the upside attracted attention as upside resistance was broken leading longs in to the trade with stops just below former resistance, now support. Once the breakout failed by the 3rd day in the yellow box, note the strong downward momentum in the day's candle as stops are hit causing downside momentum, but the original demand on the move through resistance is apparently what smart money was looking for, perhaps for a downside trade to the accumulation zone under the range's support, perhaps just for the move to the accumulation zone below support where they know there will be more stops and short sellers coming in creating plenty of supply that can be accumulated in large quantity and cheaply.

In my view, the move below support so far, is not extreme enough to cause the fear and panic selling needed for the kind of supply these large trading firms need. The EIA Nat-Gas inventories are due out in less than a half an hour, they are often volatile and may do the trick so we'll be watching for signs then.

Here's a 60 min chart view of what happens to a failed breakout and the rapid move lower, which is all covered in my links on the right side of the member's site, "Understanding the head fake move".

 The intraday chart sending UNG lower...

However the 3 min is positive...

The 15 min is positive... It couldn't take that much to get UNG in to buying position and / or a call options position which would be a great set up, first things first though, we need the divergences so lets see what we get.