I previously talked about Energy (XLE) being at a possible pivot point on Tuesday. It rallied strongly, leaving us with many potential choices for possible trades. Given the breakout in Crude Oil, one of the charts that I was drawn to on Wednesday was Natural Gas (UNG). Carl and I spotlight UNG often as we follow it closely. The chart has continued to shape up nicely -- since I spotlighted it on Wednesday, it has broken out.
However, I cannot forget that it looked very bullish earlier this year, with a cup and handle pattern as well as a reverse head-and-shoulders. Both patterns busted, which is why I have listed a stop level just below the double-bottom. At the same time, if it turns south and drops below the 20-EMA, I'll likely drop it (full disclosure: I own UNG) and wait for a new set-up.
We have a new short-term double-bottom on UNG, which has broken above the confirmation line of the pattern. The minimum upside target would be about $10.50. There is a new PMO crossover BUY signal and the RSI just hit positive territory. I also note a positive divergence between the OBV bottoms and the price lows of the double-bottom. There are risks, of course; I've already pointed out the busted patterns.
It is very positive to see this new breakout; we didn't have it when I presented this chart Wednesday. Now, instead of strong overhead resistance, we have a strong support level, as it has an overlap of the 50-EMA as well as the confirmation line. I've set a 9% stop that would indicate a breakdown from the double-bottom. As noted above, though, I don't think that I'll let it drop that low before selling it.
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Let's take a quick peek at the Weekly Chart. It is in log scale so that we can see price movement better. We have a rounded bottom developing. The RSI is rising and should reach positive territory soon. The weekly PMO has just turned up above its signal line and is not overbought. I find that PMO bottoms above the signal line are especially bullish. The one issue I have with this chart is that price hasn't managed to cross above the 17-week EMA.
Conclusion: Overall I am very bullish on UNG. Consider a subscription to DP Diamonds or DP Alert. I presented this set-up on Wednesday to subscribers. Interested in 50% off your first month? Use coupon code: SAVE50 and your first month will be at half price so come check us out here!
Happy Charting! - Erin Swenlin
Technical Analysis is a windsock, not a crystal ball.
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