UNG Nat Gas Tests the Apex of a Daily Triangle for Support

Jun 24, 2009: 11:28 AM CST

A few weeks ago, I wrote the post “Volume Surge in 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!

Please join me as the MoneyShow.com rebroadcasts my presentation “Idealized Trade Set-ups for the Intraday Trader” on July 1st at noon EST – I’ll be there on a free live chat to answer questions through the presentation.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “UNG Nat Gas Tests the Apex of a Daily Triangle for Support”

  1. J Says:

    The price actually broke below the apex but its been consolidating at 14.0x. In addition, a bullish wedge can be seen forming on the 15min chart.

  2. Garuda Says:

    Technical analysis of UNG is mitigated by peculiar combination of swaps and futures contracts underlying the ETF.

  3. Corey Rosenbloom Says:

    Agreed, but one needs to know key levels for possible stops and targets somehow when trading this and other ETFs. Not saying the science behind it is perfect or as pure as a stock or market ETF, but we have to make do with what we’re given.

  4. J Says:

    The price actually broke below the apex but its been consolidating at 14.0x. In addition, a bullish wedge can be seen forming on the 15min chart.

  5. Garuda Says:

    Technical analysis of UNG is mitigated by peculiar combination of swaps and futures contracts underlying the ETF.