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UNG: Stalking the Elusive Bottom

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Near-term fundamentals are rocky - but stage is being set for a rebound.

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Smita Sadana offers Bull Market Timer - an in-depth look at bear markets which gives you the tools and indicators that have proven to confirm the real beginning of the next bull markets, so you don't get burned by false rallies.

I remain out of my office on extended travel for personal business, but cannot wait to get back to my trading desk Thursday of next week.

Meanwhile, some quick thoughts on UNG, which I've been keeping an eye on for a potential bottom. Here is a 1-year chart on UNG.


Click to enlarge


You can see the very clear and painful downtrend that has crushed this ETF - the result of reduced consumption and excess inventory. Now there are numerous reports of significant levels of production being shut in, due to these low prices, and we're slowly setting the stage for a rebound.

The near-term fundamentals, to be sure, remain difficult, but you can trust the market to sniff out a change in conditions months before you see it in the headlines. I've been watching this ETF very closely for such signs.

Today, very quietly, it's rallying over 3% to $14.90 on good volume, and I can see large blocks flying on the buy-side. Here is an intra-day chart.


Click to enlarge


If it can close strongly today, the first target will be to fill the gap around $16 and reach its downtrend line in the same vicinity. If it can clear that on good volume, the next target will be just above $18, which is the March high. Once that hurdle is clear, I will look for a strong intermediate-term uptrend in this commodity.

Here's a closer look at these near-term resistance levels.


Click to enlarge


As always, we need a good stop-loss if things don't go our way. Fortunately, there's a logical one very close to the current price, just under today's low of $14.39.

Good trading, Minyans - you'll hear from me more consistently starting Thursday of next week!



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No positions in stocks mentioned.

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