UNG Nat Gas Update

At the end of November we expected a pullback , mostly along the lines of a gap fill, but despite how cold this winter  has become, Fall and right in to winter was an unseasonable warm trend, one we accounted for in some December posts mentioning that the actual winter season was not even yet upon us which is December 21st.

UNG pulled back more than the expected pullback from the late November posts, however it is looking interesting again.

Today's EIA Nat Gas report came in...

Consensus expected a draw of 222-226 BCF with the actual coming in at -228, a bit more than consensus and about 9 bcf more than the prior.

Here's where we stand with UNG/UGAZ...

 This is one way of looking at UNG, one which we have seen some stop runs, some accumulation on them, what looks like a head fake above a an ascending triangle (bullish consolidation price pattern so a head fake wouldn't be surprising) and a 3-day Harami or "Inside Day", with volume events around all of the candle sticks.

Another interpretation of the above specific movements would be to re-draw the trend line in a much more basic fashion.

 This looks a whole lot more like an Inverse H&S price pattern. The failed breakout earlier in the year is something I can't give you an answer on, it had good looking volume, a good looking candle, but perhaps it's more telling in what a failed breakout would tell retail traders, "Move on" which would give Wall Street UNG essentially to themselves at what is a low end of the range and a steady one at that, typically seen at accumulation and distribution points (depending on the preceding trend).

 Here you can see why we called for a pullback in November to the far left and there's a lot of consistiency in the charts on both that signal, and the leading positive in the area of what looks like an inverse H&S base.

 This 15 min UHG chart confirms the exact same, negative in November and positive going in to this range which is at the lower end of the range for Natural Gas prices.

The very recent increased upside ROC in 3C caught my attention as well.

This 5 min chart offers more detail, a positive that looks like the lower end of the range is being accumulated and the upped end is letting out some supply to send prices back to the lower end where they appear to be on a solid accumulation trend. Again, the recent increased positive signal of this month draws some attention.

 Once again, the upper end of the range sees some supply let out and as UNG moves lower that supply is absorbed with an interesting, stronger than usual positive divergence recently.

Note there is no negative divegrence right now on the 2 min chart.

 The 1 min chart confirms this trend I believe is in effect, accumulating on the low end of the range, in other words a classic base. However on the 1 min intraday, there's some distribution since the EIA report, I doubt it's the report, I understand weather is suppose to moderate until March 12th, that may be one more run to the lower end of the range, but I can't say on just a 1 min chart, if I saw the divergence migrating to 2 min and longer charts then I'd say that's probable, but I think it's probably too early to see that.

I checked the NG futures, this 15 min chart is in line with price like many of the other charts in this area, confirming.

The 5 min chart shows nothing other than confirmation as well, which is what all of the UNG chrts show in the same area with the exception of the 1 min. As I said, it's too early to tell if that's a simple intraday signal or will become a larger pullback toward the lower end of the range again, but what does look clear is this large, flat range that looks a bit like an inverse H&S base, does have a very strong long term signal confirmed throughout all of the charts.

I'll follow UNG to see if there's any migration from the 1 min chart to anything longer, but all in all, I like what I see, even if it were to pullback to the lower end of the range 1 more time which I can't say with any credibility at this point that it will. What I can say is the larger picture here looks pretty interesting for a move or breakout above the $15 area soon.

I'll keep you posted.