(UNG) has recently caught my attention. While it was in a significant downtrend for the better part of a year, it has recently been consolidating right under the $20 level. A look at the daily chart shows a long move down and then recently a sideways consolidation pattern. While this is typically a continuation pattern, I am beginning to think that the next move may be up rather than an extension of the previous down trend.
Over the last two weeks, there been significant support above $18 and significant volume.
The $20/$20.50 level has been tested multiple times; the more tests it undertakes, the more likely it is to break.
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Both the 20-day and 50-day moving averages have turned upwards and UNG is trading above both.
If we zoom in a bit and take a look at the hourly chart, we are presented with two scenarios:
1. The rising wedge holds and UNG breaks through the $20 - $20.50 resistance level on high volume and a new long-term up trend is produced.
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2. The head and shoulders pattern within the wedge breaks downwards and the down trend resumes.
I’m leaning towards option one, but will be waiting for a breakout confirmed with volume in either case.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
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