Dark, Light, Dark Light, Dark Light

Remember this clip from Horton Hears A Who? … That’s about how the financial press paints it concerning weather forecasting for natural gas:  Hot, Cold, Hot Cold, Hot, Cold.

In a previous update, here, we said that weather forecasting was essentially useless when it came to trading nat-gas or the tracking fund UNG.

Just looking at the past week’s forecasting shows that it’s true.

Instead of researching fundamentals, our focus is entirely on price action. 

Going back briefly, the October 4th update said this:

At pivots, this price action scenario is nearly always the case. 

UNG moved higher immediately at the next session and has not been at those levels (11.10 – 11.20) since.

We are still in a reversal (higher) until proven otherwise.  At this juncture and possibly at the next open nat-gas will frustrate every one that’s long, yet again.

Today’s action was typical:  A gap-down open that immediately pushes higher and then higher still until until late in the session.  At that point, price action began to erode.  Intra-day gains turned to losses and UNG closed near where it started

Standing on the sidelines and from an entry standpoint, the current (overnight) situation is removing risk.  The farther down the retrace, the more risk is removed … up to a point.

If the current position in the futures (NGX20) is maintained to the morning open, UNG will begin trading right around the 12.00 – area.

Note, there is nothing that says a reversal upward has to continue. 

That’s the way of the markets.  It’s hard enough to monitor and decipher what the price action is telling us; let alone confusing the situation even further with some supposed fundamental “reasons”.

The current reversal was called to the day (October 4th).  Let that be evidence enough of apparent price action skill in this particular market:  Not a recommendation, not advice and certainly no guarantee of future success.

Anything can happen.

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.
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