Thursday, August 06, 2009

Natural Gas - Update



Natural gas sold off today and is in the process of filling the gap. If you are long this market, there are two areas where you can place your protective stop. The first area is right below the gap. Many times markets fill gaps and then resume their previous move. The second area to place a protective stop if you are long is right below the July 29th low. Technically speaking, a new bull trend is defined by higher highs and higher lows which we are seeing take place right now. In order for this current short term uptrend to be negated, we would need to see a lower low take place and that means prices must move below the July 29th low.

Where you place your stop depends on how much money you are willing to risk based on your money management approach. I personally will scale out of half my position if the gap is filled and will place my protective stop on the remainder of my position below the July 29th low.

11 comments:

Andrew said...

Kevin,

Interested where you entered UNG? Was it at a break to new recent highs?

Cheers,
Andrew

Anonymous said...

You have posted a 4 year cycle low due next year @ around 550. While you point out the other 4 year lows, I notice those were not THE lows for the corresponding 4 years, while the one you have for 2010, is THE LOW. Any clarification will be helpful.

Thanks,

Kevin said...

A 4 year cycle low does not have to be the low for the year. Every 4 years there tends to be a buy point where the market rallies from, almost like a launching pad. This low does not have to be the low for the year although many times it is. The low forecasted for next year is an approximation in TIME not price. 550 just happens to be where I placed the arrow. I haven't a clue as to what the price low will be next year. The chart is simply forecasting for a buying opportunity to take place sometime next year in the fall.

Kevin said...

Hi Andrew,

Yes I did get long when prices broke to new highs.

frank said...

Hi Kevin

UNG went below the gap by 10 cents and then poppped up again.

Would that have been a stop-out or should the stop-loss have been lower than that.

thanks

Kevin said...

I kept my stop a little lower...more like .40 to .50 below the bottom of the gap. Whenever I play support or resistance levels, I always give these areas around 50 cents before I stop myself out. In my opinion, .10 is too tight.

paul111 said...

Hi Kevin,

I kept my stop a 50 below the bottom of the gap. Technically speaking, is UNG still considered bullish?

Thanks.

Paul

Kevin said...

Hi Paul111,

As long as UNG continues to make higher highs and higher lows, the short term trend is up.

Anonymous said...

Kevin,
I also thought that UNG will catch up with USO, but got stopped out with a generous stop. Since this trade is busted, should we be shorting UNG and go long USD?
Jack

Kevin said...

Hi Jack,

I'm going to leave UNG alone. I can't short it here.

Anonymous said...

What will happen to UNG when USO breaks below trend? USO has a massive potential head and shoulders right now.

Dollar is breaking out. Deflation will roll the markets over soon IMO. Maybe they see S+P 1050 but after that I'm not sure people really want to know how far they are going to plummet. There are no earnings to support these valuations. Lotsa debt, no earnings, not good. Anyone who listens to government talk about a recovery being at hand is going to be very upset soon.
DaveT

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