UNG/UGAZ Heads Up

Our UGAZ long added +9.25% today, this is another that I wouldn't chase. Yesterday's update can be found here, UNG / UGAZ Update.

I see a lot of good stuff in UNG and UGAZ, they have done many of the things expected to complete the pullback, however they are still very low in the base when considering the big picture so I would not chase them. There is a possibility of a near term pullback, although I will deal with specifics below with the chart.

From yesterday's post linked above, this is an excerpt from it with a chart and commentary from the  UNG Follow Up posted Thursday...

Remember these are Thursday's charts and comments in "Italics"

"Expected minimum pullback at the top of the orange range and a full gap fill at the bottom."

As of yesterday, we met  the minimum target and halfway through the lower, secondary target...

 UNG as of yesterday's close, hit the minimum target and half way through the secondary, lower target. This is why I have maintained the UGAZ long position rather than try to trade around some tight corners as I trust its long term probabilities and that's what this position is about, long term probabilities, not a trade.


 As of today, with a UNG  +3.25% gain and a UGAZ +9.25% gain (putting our UGAZ long at a gain of +15.70%.

The volume recently since the head fake-like failed breakout (yellow arrow), which we posted that day, "If it didn't make a clean breakout on increasing volume, then it would quickly move below the range, accumulate shares and make a full hearted attempt to complete the breakout which it did November 6th, with clear signs of a pullback coming, I gave you some tools to not only spot the pullback, but to know where to enter as the pullback just about touched range support on 11/13 and 11/14.

Yesterday's update also included this chart (from yesterday's analysis), *"excerpts in Italics"*

"The daily X-Over screen that recently gave a new buy signal was one of the potential pullback areas at the blue 22-bar moving average which isn't far from a gap fill as well."

As our "X-Over" screen to follow trends, while avoiding false moving average cross-overs or whiplashes, gave us a long signal at the white arrows, one of the higher probability pullbacks using this screen, would be to the blue 22-bar moving average as posted yesterday (above).

And as of today...

 We clearly touched the 22-bar/day moving average (blue) and maintained all 3 signals/the long signal.

For those of you who may have been following along on a simple ROC signal/tool that I gave you for pullbacks/entries specifically in UNG, you may have seen a long signal yesterday in UNG...

From the intraday (from 5 min to 60 minutes this works, in fact even better on the longer 15, 30 and 60 min charts), you watch for the divergences between price and price's ROC which occurred while clearly at yesterday's move off intraday pivot lows on increasing volume.

An example using a 30 min chart instead...

Not only does this simple and severely overlooked indicator call both pullback highs in the chart, but gives a clear positive divergence/buy signal yesterday.

Although I have posted many times about using ROC on different indicators as well as on price, here's the specific posts regarding its use with UNG... UNG Update

As for the current charts and the possibility of the remaining gap being filled, I'd say it's not a high probability. Again, considering our long term secular outlook on UNG, this was not a position I was interested in trading around at all and a such, left the UGAZ long in place this entire time since the failed breakout attempt back in September, it's just not worth looking back a year from now and knowing I missed the trade over a percent or less (the AAPL lesson).

 In several updates I have said that the negative divegrence which pointed to a pullback on charts like this 5 min, would be repaired by the time UNG was a long candidate, it took less than a day to repair this chart as 3C not only repaired, but gave a leading positive divegrence yesterday in the flat range.

As always, stay alert in dull market ranges as this is where the most underlying action tends to occur, giving rise to my motto re: dull or flat markets, " They are dangerous...They are like the kids in the next room being a little too quiet, you know they are up to something"

 I said the 15 min chart would be repaired by the time UNG was a long, look at this amazing leading positive divegrence as well as the positive divegrence in yesterday's range on a 15 min chart! That's a lot of movement for a single day and  this is one of the reasons I doubt UNG comes back to fill what's left of that small gap. However, I would not chase UNG/UGAZ long, they will pullback and offer a low risk entry.

This intraday 1 min chart confirms UNG's price move to the upside today, but as you see it also shows a negative divegrence in to the close. Right now, this negative at the close is only on the 1 min chart, ALL OTHERS ARE POSITIVE ANDSD EITHER LEADING OR IN LINE.

My guess is that this is some late day profit taking on a strong 2-day move for UNG, certainly for UGAZ which has the exact same signals.

If you are interested in a potential UNG pullback, I can say with a lot of confidence that if you see it finish filling the gap on a pullback, which would be an ugly 1-day move, I'd feel very confident that it would still be a buy without even needing to consult the 3C chart as all of the other charts are so amazingly strong.

However, if there's some slow-down/consolidation and you are interested in an update as to the possibilities of the remainder of the gap being filled or another pullback entry/add-to long, feel free to email me.

I will continue updating UNG/UGAZ as we are VERY low in the overall picture, I suspect a year from now we'll look back and even an entry at $28 will look like a bargain.