Friday, September 11, 2009

UNG - Natural Gas



A few of you have been writing in asking me if this is the bottom in Natural Gas so I thought it would be best to post an update which will illustrate how I see the market.

Above is a daily chart of UNG and as you can see this market is in a clear downtrend. Notice every time the oscillator moves into the sell zone UNG sells off. I placed arrows on the chart so that you can easily see these overbought areas. Until I see this pattern of lower lows and lowers highs broken, I will have to just resist trying to pick a bottom. I tried twice and got burned but fortunately I am quick to get rid of losers so my losses were small.

A key level in UNG is the $12 area which I consider to be resistance. If this market can post several closes above $12 followed by a consolidation and then a breakout to the upside, I might consider going long but until then I will remain on the sidelines.

8 comments:

Mr. Monopoly said...

Let the buyer beware: UNG is no longer issuing new shares. Since demand exceeds supply the existing shares have been trading at a premium to net asset value. The premium was 11.5% as of 9/10/09, according to etfconnect. This is a great edge for anyone trading from the short side, but it is not a good deal for the longs! When I do start trading gas from the long side I plan to use GAZ instead of UNG to avoid this handicap.

Kevin said...

Good stuff, thanks

Anonymous said...

Not anymore:
http://etfdailynews.com/blog/?p=6045

Mr. Monopoly said...

UNG's Managers Decide To Re-Open Natural Gas Fund. The premium should dissipate within a few weeks.
http://is.gd/3dm2X

Anonymous said...

GAZ too has a premium of 15% to its NAV. So this too is a risky trade. Why would one want to pay for 15% air. So unless the premium comes down, it too is a risky trade, IMHO

Mr. Monopoly said...

Wow, anonymous, thank you - I was shocked to see that GAZ is indeed trading at a 15% premium. It is wise to check everything and not rely on your assumptions!

Art from FLA said...

hmmm....nat gas up 64% off its low, UNG up 25% off its low.....doesn't seem like the fund is doing what its designed to do....other than make the fund managers and company rich at investors expense

Art from FLA said...

GAZ...you've got to be kidding me...under a million shares a day....and I recall nat gas being up yesterday....why did this ETN close down....just another scam....only up a measly 32% while nat gas is up 64%....oh and correct my last comment...UNG is up 34%

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