Biotech: Election Top Closer

The October 4th, update proposed a top and reversal for Biotech (IBB) at or near the election.  November, 2nd , or 3rd, could be new highs followed by an immediate reversal.

Fibonacci week 34, from the 3/16/20 lows, is the week ending on Friday, November 6th.

The daily chart (below) has a trend that’s been confirmed; If it remains intact for the next three weeks, it will lead us straight to new highs at the beginning of November.

Following price action in this way allows for preparation. 

Timing, position size and stop levels can be (and must be) planned in advance. Not a recommendation, not financial advice.

The topping formation in biotech has been followed and traded (via BIS and LABD) by this firm since early June. 

Doing so, forces one to be accustomed to the behavior of the sector. 

Behaviors such as counter trend action in IBB, tends to be complete and resume original trend, right around the 10:00 a.m. to 10:30 a.m. time-frame.

That’s a data nugget that can’t be obtained by parachuting into a sector, taking a position and hoping it all works out.

A perfect (short) trade set-up would be for price to gap-higher into the 2nd, or 3rd (November) and allow for an entry with a well defined stop … such as the top of the gap-bar.

Of course, at the open this Monday, IBB could break the trend-line and create an alternate scenario … anything can happen.

However, at this point, probabilities and momentum (although waning) favor continuation upward.

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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.

Nat-Gas: UNG, Mid-Session

As expected, nat-gas is moving to the upside. 

The original entry from the last session is well in the green; the trade has been increased by 50%.

‘Pyramiding’ is a classic time-tested method for market speculation.  Wyckoff discussed this technique in his first publication of “The Ticker”, back in 1907.

That specific (first edition, 1907) text can be found here.  Scroll to pages 17 – 18, for “Rules of a Successful Speculator”.

Other Wyckoff links:

Compilation book is here.

Wyckoff “Ticker” publications are here.

Continuing on with nat-gas, as of this post (12:58 p.m., EST), the futures NGX20 is right at resistance in the 2.800 area.  This corresponds to roughly UNG @ 12.45.

We’ll see if it pushes through to the upside.  If not, then we can expect some kind of downward test at the next session, tomorrow.

At this point with NGX20 trading at approximately 2.795, it looks like it can go a little higher before it hits a limit-up for the day.

Nat-gas futures contract limit data is here.

Barring some unforeseen event that could cause nat-gas prices to collapse, a position is now open that will allow participation in an expected price rise going into the fall and winter months.

Potential exit targets have been established as identified in this report, here.

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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.

Natural Gas: Danger Point

It was a vicious wipe-out in today’s session with nat-gas, UNG and futures down sharply.

Let’s summarize the recent action leading up to today:

Late Sunday evening:

Nat-gas pushed past upside resistance (in the overnight futures market) on Sunday, the 11th

Once past resistance, price action stalled.  That’s a warning sign a reversal is imminent.

Early Monday morning:

By the time we got to the regular open on Monday, nat-gas was already in a reversal condition. 

Correspondingly, price action in UNG declined throughout the day and closed lower.

Tuesday, all day

Yesterday was an upward test of the reversal that failed to post a new daily high. 

Price closed lower and the stage is set.

Tuesday, overnight to Wednesday

At the open last night, the futures declined immediately and traded down about -5% to -5.5%, in the area equivalent to UNG ~ 12.04.

This morning opened even lower (UNG:  11.91) and then attempted to rally.  It looked like UNG was going to make higher it until later in the session when things fell apart.  UNG washed out and closed lower.

So, what does it all mean?

Working with a commodity tracking fund like UNG, means you have to track the actual commodity.  In this case that would be the current front month futures contract NGX20.

Looking at the price action of the futures, we see that during today’s wipe-out, towards the close, NGX20 bounced off well established support at the 2.600-area.

It was at this juncture where a long position was opened; as price was declining at the end of the day:  UNG @ 11.87, with a stop in the vicinity of 11.74-ish.

Wednesday overnight session

As of this post, 9:56 p.m. EST, NGX20 opened higher and is drifting higher.  This is expected if the bounce off support scenario is valid.

The weekly chart (below) of UNG shows that risk has been nearly removed … never completely, but a close as one can reason.

The expectation for tomorrow, Thursday, is continued action higher and out of the danger point. 

What’s in the EIA report is likely immaterial.  Sure, it provides an excuse for price to move.  However, probabilities are already set for continued upside.

UNG is at the danger point.  Price action can go either way.  If it continues lower after the EIA report, then we have probability of making new lows for the winter. 

New lows seem unlikely going in to fall/winter but anything can happen.

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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.

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.

Wheat Accelerating Higher

The chart of WEAT shows we may be rotating higher … much higher.

The recent rate of the trend-lines is shown (below). If today’s action in the market moves higher, it helps to confirm the new trend-line.

Taking advantage of this move could be through trading the futures contracts.

Our example, is using the Teucrium WEAT fund to gain exposure.

More data on that fund is here.

As reported here, crop prices could spike based on several factors. 

Note at time stamp 10:18, it’s being reported the USDA is counting the corn crop destroyed by the Derecho as ‘yield’.  This claim has not been verified.  We’re letting the charts do that for us.

Wyckoff stated many times in his writings, there are thousands if not tens-of-thousands of analysts covering every conceivable sector of the markets.

Their collective decisions are reflected on the tape. 

Proper interpretation of that tape, can discern the result of their analysis and the most likely direction of the markets.

An expandable version o the chart is here.

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.

Natural Gas: Too Late To Get In?

The short answer is probably no. 

The long answer (not a recommendation, not advice) is nat-gas can be extremely frustrating to trade.

The gap-up open today, dissipated and closed lower.  Currently, in the overnight session nat-gas is lower still, by -2.05%. to -2.15%

Based on that data, the daily chart of UNG has been updated to show where trading action is taking place overnight.

Note the trend-line:

If price action contacts this line again and bounces off to the upside, it’s an excellent confirmation … possibly leading all the way to the December – January (planned exit) time frame

Coming up in a few days is the EIA Natural Gas report; due out on Thursday at 10:30 a.m.

Price action as a result of the report (just after release) may give an opportunity for an entry provided the overall trend remains to the up-side.

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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.

Natural Gas (UNG): Forecast Higher

It may get busy in the coming week for natural gas. The hurricane is past … moving inland and dissipating

Damage assessments are, or will come in and production conditions clarified.

That itself may result in a lower open on Monday.  However, this time is not like last time.

The charts of UNG have an interesting correlation to last year at the same time. 

Almost to the day (10/11, vs. 10/2), price action penetrated support and rebounded. 

Click here for expandable version of the charts.

The first “We are here” arrow shows the rebound, after penetration pushed past the prior week’s high.  Just like this time as seen on the “We are here … Part 2”.

Looking back:

The initial lows (August for 2019, June for 2020), the percentage gain on the first leg up for 2020 is twice that, 64%, vs. 32%, of 2019. 

That’s a huge difference; indicating something else, possibly a major move higher is about to happen.

Wyckoff said over a century ago, that ‘somebody always knows something’ and that something is reflected in the chart.

We could have a major unexpected event that interrupts or destroys production and/or distribution.  Like an earthquake in the New Madrid Zone.

A major earthquake in the Midwest has never happened in recent history. 

However, reported here, there’s substantial evidence that something seismic on a big scale is a probability.

In fact, increased seismic events are clustering around the west (WA, OR, CA), Midwest and all the way up to Pennsylvania.  These events are happening now.

If at present, there are minor quakes in this area relieving the Craton Plate tensions with no major quake coming, we still have the possibility of a brutal winter with unprecedented cold.

Either way, the second chart of UNG shows a trading channel in the works. If it remains in-effect, UNG may reach the 20 – 26 area by January 2021.

Look for a lower open on Monday that may be temporary (not advice, not a recommendation).

Note:  An update to the analysis is planned after the futures markets open later today, Sunday.

Update: 9:16 p.m. EST

Instead of opening lower, the nat-gas futures NXG20 (November contract) is currently trading up about 6% in the overnight session.

The weekly chart of UNG has been updated with a black bar to show an equivalent move. Note the bar is at or near resistance from three weeks ago.

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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.

Friday: After the close

Two markets being watched at this time are biotech (IBB) and natural gas (UNG).

Today’s session in nat-gas was strong but on the downside, price action closed below last week’s high.

There’s a lot going on with the hurricane in the gulf; potential earthquakes (threatening to rupture lines), already happening in the New Madrid zone.

So nat-gas could literally explode at any time. 

We’ve analyzed price action enough to show a reversal underway.

The downside; it’s a bit weaker than expected. At least at these initial stages.  However, commodity markets tend to start slow and then build into a blow-off top. 

So, we could still see intense action during November and December.

Next, is biotech and specifically IBB.

The chart below is an interesting picture.  Price up and volume down.  This type of scenario has one of two meanings:

No. 1:  There is no commitment to the upside and reversal is imminent

No. 2:  Volume has decreased as sellers are backing away from the market … prices may drift higher.

With the negative report from Amgen (AMGN) during the week, the bloom may be off.  Amgen is the leader (market cap) of the sector.  If it has reversed as has been proposed several times, it may be strategic and long term.

The chart wedge that had been discussed here and here has now been officially and decisively penetrated to the downside.

Barring some miraculous recovery, the measured move for AMGN is in the vicinity of 192; about 20% down from current levels.

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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.

Nat-Gas: According To Plan

The last update said that nat-gas (UNG) would have a test lower to wash out any late-comers to the rally.

Price action indeed went through a deep retrace/test and also a secondary test during today’s session.

This is normal market behavior at reversals. 

A test can always fail with the market resuming its downward trajectory.  However, at this juncture, probabilities favor continuation of the reversal to higher prices (not advice, not a recommendation).

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.

How to use Fibonacci projection

There’s a lot happening in the biotech sector. 

Today, Wednesday, 10/7/20, will be a Fibonacci 144 days from the low of March 16th, this year.

If the all-time high (IBB) was reached on July 20th, Fibonacci day 89 (minus 1), then today may be a critical juncture for the sector.

The current move off the low on September 4th, could be a counter-trend move.

Using the Fibonacci projection tool … a standard addition to most chart packages, we see a possible 1:1, a-b-c projection to the 141.28-area.

Counter trend moves (a-b-c), typically have equal ‘a’ and ‘c’ waves.  The ‘b’’ wave in this case was 76.4%, of the ‘a’ wave … deeper (weaker) than normal.

It just so happens the 141.28- area of IBB also corresponds to a Fibonacci retrace of 76.4% from the 9/4/20, low. 

If IBB reaches those levels today and stalls, it’s an indication that at minimum, the market respects this area.

What happens next? 

To go short (not advice, not a recommendation) is selling into a rising market. 

Technical indicators, MACD, moving averages are all pointing up both on daily and weekly .. although weekly MACD lines are still in a bearish cross-over.

Certainly it’s the danger point. That’s what we’re looking for. 

It’s the trader’s discretion on what to do if/when IBB reaches 141.28. From this firm’s perspective, price action behavior itself at the projected level will be the arbiter.

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.