A technical pattern which has had a virtually 100% success rate is in effect now: look for positive and negative divergence on the CCI, coupled with a PPO-9EMA crossover and a break of support or resistance. There has not been a crossover on the PPO yet but it is flattening out nonetheless. Right now I highly suggest scaling into UGAZ and setting a stop below the recent lows. There isn't much to say on the graph because it is fairly self-explanatory from a technical perspective.
Comment:
I actually forgot to add that if you look at the most recent price action on the 1 hour charts, you can see an extremely clean down channel that was recently taken out. You can see that on the chart above but obviously the reactions aren't as 'crisp' as they could be shown. There was even a back-test of the broken resistance as well before further upside action.
Comment:
The PPO has finalized its crossover with the 9-EMA. This indicator has been on its own a very accurate predictor of NATGASUSD's price movement. In the last year, I have seen it bear one marginal loss and one trade at par. The rest have been successful if you back-test its history. However coupled with both the CCI and RSI making positive divergences, this is a solid case to enter long or add more exposure.
Comment:
Despite the big drop in price today, we managed to touch the resistance coming off the March 2019 price ‘hill’. I do not have that resistance line drawn on the chart above as I discovered it later, but it captures a lot of major moves within the general downtrend before being taken out and now back tested from above. I maintain a positive view on NATGASUSD as today helped clear out longs and suck in more short positions which may act as fuel in a short covering rally.
Comment:
Things would fine had it not been the people in charge of UGAZ who have failed badly at properly gearing it to reflect the price action of natural gas. Yesterday the price jumped by about 1.6% yet UGAZ closed down 0.5%. This is extremely embarrassing that they cannot manage this investment vehicle properly; stops might get hit just because of this fact.
Comment:
I noticed just today that NATGASUSD was forming an inverse head and shoulders pattern: left shoulder's peak on Oct 3rd, head's peak on Oct 11th and the right shoulder's on Oct 21st. The implied target from this formation would be for NATGASUSD to reach $2.51 or more in the near term.
Trade closed manually:
As an active trader, I closed out my UGAZ position. That said, I still think there will be more upside in the coming weeks so I will be looking for a pullback in price to re-enter.
Comment:
Well it was without question a mistake to pull out early given how prices went. Nonetheless, I made two successful trades with UGAZ in this cycle so I'll take it. Moving on, there is still more upside left however the risk-reward ratio has definitely become stretched. Now I am not done with this trade and I expect that as most things, it will take a breather first before starting another leg up.