In Position: Natural Gas (UNG)

It was a wild ride in the futures market starting this morning around 6:30 a.m. EST.

Nat-gas, is similar to silver where it likes to spike lower or higher as its terminating move. 

From a UNG standpoint, that lower pre-market spike was all the way down to 10.66. 

Price action recovered and was essentially back in the previous day’s trading range before the regular open.

As done yesterday, the chart of UNG has been modified to show the NGX20, futures activity.

Doing so, paints a more realistic picture of what’s going on.

As of this update, UNG is at 11.16 and has already posted a new daily high (a classical analysis buy signal).

Using the weather:

As we enter a grand solar minimum, weather forecasting (to predict nat-gas moves) is not viable.

The weather is already extreme and will continue.

Earthquake activity has picked up dramatically … it’s off the scale; no pun intended.  In addition, we’ve got weather extremes, crop failures and volcanic activity.

All of this is happening at the same time.  The source at this link does an excellent job of monitoring earthquakes and associated phenomena.

These two links, here and here are good source for weather extremes and crop failures.

Unanticipated weather extremes could launch nat-gas, UNG to levels atypical for a seasonal (winter) position.

One well placed earthquake fracturing gas distribution lines, could do the same.

Typical nat-gas move:

A seasonal nat-gas move, starts around late September, early October and tops out just before December.

The possibility of weather extremes could push that top out into January or February … completely unexpected.

Price action is the key. So far, it’s moving off the danger point to slightly higher levels.  We’ve opened a sizeable position and will follow the price action on up with a stop as needed.

Depending on how that action behaves, the current stop level (not advice, not a recommendation) is tentatively set close to yesterday’s low:  UNG 10.98

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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.

Danger Point: Natural Gas

Natural gas trades as a futures contract nearly 24/7. Therefore, the daily chart of UNG is misleading. 

Not shown on the standard UNG chart is the most recent low.

That low, in the futures market was right around 7:30 a.m EST on Wednesday, September 31st.

By looking at a chart of UNG, one would think the low for nat-gas occurred today.  Not so.

We’ve modified the UNG chart below to represent recent price action on the November contract (NGX20), not shown on UNG.

The low from yesterday’s action is clear. Also clear is today failed to penetrate that low even though a new daily low appears on the unaltered chart of UNG.

In all, it means were at the danger point for natural gas.

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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.

Sell The Rumor

Natural gas price action (UNG) could be a case of sell the rumor, buy the news.

The EIA Natural Gas Report comes out at 10:30 a.m. EST, this Thursday. 

The 61.8%, retrace level (from the June low to the August top) for UNG is around the 11.04, area.

If UNG continues lower in the next session and does not make significant headway (down), it may have found a bottom ahead of the report.

Note that price action can get volatile for a few minutes after the release.

Nat-gas is similar to silver in that regard … stop run attempts (and spikes) are the norm.

We’ve already come off a long term low during June this year. Now, we have seen a recent Sign Of Demand (using a Wyckoff term) during the past week … it all suggests bias to the upside.

Expandable version of the chart is 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.

Winter of Discontent: Pre-Market Update

Update (9/9/20, 8:11 a.m. EST): UNG, shows pre-market action trading higher, +2.11%, as expected.

Original post (9/8/20):

Natural gas and more specifically, the tracking fund UNG is at its trend line; A trend line that’s been in-effect since July 31st, this year.

The Winter of Discontent post on natural gas, indicated a major long-term reversal.  That analysis was complete with a test location (shown on the chart below).

It’s important to note, the test level was identified thirteen (trading) days in advance.

There was plenty of time to monitor price action, perform additional research and generate a supporting case before the test zone was reached.

UNG subsequently tested that level and never looked back.

Now, UNG has penetrated support (at the 13.00-area) and contacted its July trend line at the same time.

Essentially, in Wyckoff terms, it’s in spring position with the added technical condition of being at trend.  For more on Wyckoff “springs”, see this publication.

This exact point is the ‘danger point’.

If UNG does not immediately bounce higher (at the next session), the trend may be broken and we’re right back into a possible continuation of the bear market that’s been in effect for years.

It should be noted that ‘danger points’ are also the location of lowest risk.  Verification or failure of the move is not far away in either market direction.

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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.

Peabody Energy (BTU) Reversal

Way below the media radar, coal prices are reversing off a four-year low.  Peabody Energy (BTU) is reversing as well.

iStock-166215263-CoalWhy would coal, a supposed dead product be reversing now?

The list could be endless depending on one’s level of awareness.

Here are a couple of potential reasons.

No. 1

Were entering a 400-year solar minimum with decreased sun-spot activity and colder (much colder) earth temperatures.

The natural result of such activity is a decreased earth magnetosphere and increased cosmic ray activity.

Go outside during a sunny day … the sun’s rays are not warm anymore, there hot!  They feel like burning, searing energy on the skin.  The magnetosphere is weak, letting more radiation come in.

Under such conditions (more cosmic rays) volcanic activity picks up big time.  Scientists (those still honest) have not been able to figure this one out.  It just is.

So, we’re one major eruption away from the entire earth being covered with an ash cloud.  Bye, bye solar … instantly.

No. 2

Natural gas prices are rising dramatically.  Remember the Winter of Discontent update?  That update was spot-on.  It also included the level UNG could retrace (which it did) as a test, before moving higher.

UNG is up over 44%, from those levels.  One of many (now false) ideas for natural gas, was that it’s cheap.  Not any more.

Just two potential reasons for a coal reversal at this point.  Those with advance knowledge may be taking positions.  We see it in the price action.

As always, anything can happen and coal could resume a downward trajectory.  However, if BTU is able to hold above the 2.50-level, it may have already seen its all-time lows.

Keep in mind with BTU, we’re dealing with an equity in serious trouble.  It’s not hyperbole to say, the only thing that could save this company is a major reversal in coal prices.

2020-08-28_12-05-35-BTU-Daily-4-bar-landscape-notes

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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.