Natural Gas: Another Update

Although I don't mean to harp on Natural Gas prices, a follow-up seems appropriate considering my last posting on the topic back on May 11. At that time I stated my belief - not certainty - that the ETF would bounce of the 50-day EMA. I was entirely wrong.

Rather than mentioning it at the time that failure of that support line occurred just one week later, I decided to wait and see what else transpired. Not everyone waited, and instead declared natural gas to be a disaster. This same article went on to compare the divergence in producer stocks and the commodity futures, drawing the conclusion that the producers would be next to fall in order to erase the divergence.

Of course the divergence can be erased by a rising commodity or merely meeting somewhere in the middle. In an attempt to further salvage my position that natural gas would rise in price (eliminating the divergence) I was tempted to draw another line on the UNG chart (shown here). However I waited to post this until I saw some confirmation to avoid embarrassing myself again.

I made the line thin to avoid obscuring the rest of the chart. It is drawn along the peaks of the downtrend line (only 3 months are shown but it is valid for a longer period) and was pierced to the upside 2 days before the same occurred with the EMA. The question I had asked myself was whether this line would now become a trend-line bottom, signifying a trend reversal. This, in combination with a higher low gives me some confidence that we now do have the beginnings of an uptrend. That same confidence was shaken when the EMA line failed to offer support.

If that trend line support fails in the coming weeks, well then I must really be wrong. I am continuing my position in the under-priced (my opinion) producer stock I purchased earlier. So far I am in the black, and I expect to do even better. With that said, I will avoid boring readers by stopping to write about natural gas.