RSSNatural Gas ETF (UNG) Tests Daily Support
By Corey Rosenbloom | June 24, 2009 | 3:17 PM | 2 Comments
A few weeks ago, I wrote the post "Volume Surge in (NYSE: UNG) Natural Gas" which became a popular post and a few readers have asked me to follow-up on UNG and comment on the Triangle Pattern Breakout that is occurring. Let's update the analysis and take a look.
First, we have to observe the lengthy positive momentum divergence (similar to that of crude oil) which often precedes trend reversals - that's the larger structural pattern we have.
Second, we see a clear symmetrical triangle that has formed from May until present, and the volume surge that built up as price ejected upwards out of the triangle.
However, price pulled back after breaking cleanly out of the triangle to come back to test the "Apex" or convergence point of the two trendlines that form the triangle pattern. That's an area that should be expected to hold as support and offers a ‘last chance' low-risk entry (stop is to be placed just beneath the apex or more aggressively beneath $13.00 per share).
If you're still playing for a triangle pattern break, then the target is roughly $20.00 per share.
Notice that volume was light (descending) on the retracement/pullback, which is bullish and serves as a non-confirmation of lower prices.
We also have somewhat of a bullish candle forming mid-way through Wednesday's trading (prior to the Federal Reserve announcement).
So the lines are drawn in the sand - price could bounce upwards off this level thanks to the lengthy momentum divergence, apex test, and low-volume pullback.
Should price fail at these levels, then the stop-loss is much closer/smaller than the target, which offers a very favorable risk/reward relationship and profit expectancy.
Let's see what happens here!
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