Saturday, August 22, 2009

"Is it Time To Buy Natural Gas? Let's Look at The Charts"

From Crude Oil Trader:
In all of my years of trading I have never seen so much attention given to natural gas, especially by retail traders. Investors have been piling into long positions as they see nat gas having no where to go but up. In my opinion that is just trading with emotion. What is the trend in natural gas? Let's take a look at at a trend analysis of UNG, the most common ticker for natural gas.

Smart Scan Chart Analysis confirms that a strong downtrend is in place and that the market remains negative longer term. Trade this trong downtrend with money management stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders. Based on a pre-defined weighted trend formula for chart analysis, UNG scored -100 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10......Last Hour Close Below 5 hour Moving Average
-15......New 3 Day Low on Wednesday
-20......Last Price Below 20 Day Moving Average
-25......New 3 Week Low, Week Ending August 22nd
-30......New 3 Month Low in July
-100.....Total Score

As you can see natural gas gets the worse grade possible. The pivot point for natural gas today is 3.12 and I have been calling for a target of 2.90. I know some pretty smart traders that have a 2.00 target on nat gas in the future....MORE