Volume Surge in UNG Natural Gas Fund

Jun 9, 2009: 8:35 AM CST

Might a recent volume surge in UNG (Natural Gas ETF) hint that higher prices are yet to come?  Let’s take a look at UNG’s long-term weekly structure and then step inside the ‘volume surge’ on the Daily Chart.

UNG (Natural Gas ETF) Weekly:

What’s most interesting is the sudden spike last week to over 200 million shares transacting in a single week – a record for this exchange traded fund.

It would certainly appear some fund (or group of funds) is ‘up to something’ perhaps through this ‘unnatural’ movement.

Price has been coming off a steep downtrend since the mid-2008 commodity peak which sent all commodities plunging to new lows into 2009.

Crude Oil has already completed its “Rounded Reversal” pattern with more room perhaps still to run but Natural Gas hasn’t been so lucky to rise as crude oil did.

Now might be the beginning of a potential multi-month rise… or at least we’re granted a potential low-risk opportunity if your analysis reveals as much.

Let’s step inside the volume surge on the daily chart Continue Reading…


Flags and Opportunities in the Canadian Dollar FXC

Jun 8, 2009: 12:28 PM CST

With the weakness in the US Dollar and strength in crude oil, the Canadian Dollar (and respective ETF “FXC”) have been rallying in a strong impulse up that may be setting up another low-risk opportunity into possible support.  Let’s see it.

“FXC” Canadian Dollar ETF Daily:

Starting with the March lows, we see a distinct positive momentum divergence that carried forth also on the weekly chart (it’s very powerful to have positive momentum divergences on two timeframes).

That preceded the large rally from $77 to the recent $92 high – notice how volume picked up as price rallied higher in March and has been especially strong over the last few weeks.

Price broke resistance at the $85 level and formed a quick bull flag off a new price and momentum high for 2009 (green arrow) which hinted that higher prices were yet to come.

We completed an official bull flag into the recent June highs which has also formed a new momentum high on the 3/10 Oscillator as well – hinting that odds could favor higher prices still yet to come.

In an uptrend, the 20 day EMA should be expected to hold initial support on any test, so this makes the chart attractive from a low-risk standpoint (at $88.50).  More aggressive traders could even place a stop beneath the 50 day EMA at $86 for more protection.

Also, the $87 price high in May could also be expected to hold as support (according to the “Polarity Principle” – old resistance becomes new resistance).

Continue your analysis for additional opportunities and insights into price structure and possibilities that may lie ahead.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Does Gold Always Go Up in Both Recessions and Depressions?

Jun 8, 2009: 3:42 AM CST

The following article excerpt is adapted (with permission) from a brand-new eBook on gold and silver published by Robert Prechter, founder and CEO of the technical analysis and research firm Elliott Wave International. For the rest of this 40-page eBook, download it for free here.

I have often read, “Gold always goes up in recessions and depressions.” Is it true? Should you own gold because you think the economy is tanking? Whenever we hear some claim like this, we always do the same thing: We look at the data.

The first thing to point out is that gold did not make a nickel of U.S. money for anyone in any of the recessions and depressions from 1792, when the gold-based dollar was adopted, through 1969, a period of 177 years….

What almost always does happen during economic contractions is that the value of whatever people use as money goes up as prices for goods and services fall. When gold is used as money, its value in terms of goods and services goes up. But gold can’t go up in dollar terms when gold and dollars are equated.

So no one “makes money” holding gold under these conditions. It is a fine point: What tends to go up relative to goods and services during economic contractions is money, and when gold is officially money, that’s how it behaves. What we want to know is how gold behaves in recessions and depressions when it is not officially accepted as money…. Continue Reading…

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Price Projection Lesson in Potash POT

Jun 7, 2009: 8:49 PM CST

Potash (POT) recently completed a Price Projection Target move out of an ideal symmetrical triangle pattern that I wanted to show you as an example.  Let’s see it on the daily chart.

POT (Potash) Daily:

What I’ve drawn is a symmetrical triangle that formed off the December 2008 lows.  There were a couple other nuanced ways to draw the triangle, but these trendlines suffice.

We formed a contraction period throughout all of 2009 so far and in May, price broke upwards out of the consolidating trendlines to form an initial buy-point.

What I love about this example is that it showed how it’s often a better idea to wait for a pullback to the trendline before buying – depending on your risk-tolerance.

Notice the hammer candle that formed and the increase in volume that came in after the initial break, adding greater odds to a successful trade set-up.

What I want to highlight is the “Price Projection” or price target you can set to trade off this formation.  Classic Technical Analysis teaches that you draw from the high of the triangle to the low to get the “height” (purple line).

From this, once a confirmed breakout occurs, you simply drag a ‘measured’ or equal move up, added to the top of the trendline and the upper price becomes your target to play for.

Your stop-loss would be around $80 or just below the lower trend-line.  This obviously was a successful trade that lasted almost a full month.

A negative momentum divergence has since formed and volume has clearly trailed off after a breakout.

Price could form support at the rising 20 or 50 day EMA, but the ‘easy money’ may have already been made.  We’re in another ‘pause’ or pullback, waiting for bulls or bears to display strength here.

As always, the more we see these patterns, the better we’ll be able to trade them as they occur in real-time.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Hewsion Video on the SP500 Conundrum

Jun 7, 2009: 1:04 PM CST

Back in the Digital Studios at Market Club, Adam Hewison released a new video this morning entitled “The S&P 500 Conundrum” which details the current structure of the market and insights into a couple of indicator readings with trade triangles.

In the chart above, Adam is showing the two recent Weekly (where his pointer is) and monthly “Trade Triangle” buy signals on the chart.

He’s also using the Williams %R indicator which is showing a distinct negative momentum divergence forming into the June highs (as is my 3/10 Oscillator and other momentum indicators).

In the introduction to the video, Adam writes:

“A conundrum wrapped in an enigma… that’s the S&P 500 index.

I was just looking at the S&P 500 index as we come to a close for the week of June 6th. While the market appears to be higher for week, it also appears that we’re losing momentum on the upside.

This can be seen in the second attempt to close over the 950 level. Also some of our momentum indicators are showing negative divergences.

This means that while the S&P 500 is making new highs for the move, the momentum indicators are not showing the same configuration and making new highs. This can often be the first clue of a potential market correction.

In this short video on the S&P 500, you’ll will see exactly what I’m looking at and why.”

These videos are always free and do not require registration, and – like me – add an educational/teaching component into the analysis.

Corey Rosenbloom, CMT
Afraid to Trade.com

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