Natural Gas is Not Breaking Higher
- Posted by Greg Harmon
- on June 20th, 2012
Natural Gas ($NG_F, $UNG) is a cyclical commodity. Well that is what everyone think. Rising in the winter as demand grows to heat homes and falling in the summer as the planet heats up. That may have been the case historically but not the last two years. It has remained cyclical, but only in terms of trades trying to pick a bottom in it. This cycle is much shorter, about 4-5 weeks. The last time we checked in on Natural Gas in mid May it was showing signs of a potential reversal. With trader interest peaking again it has yet to follow through on that potential and is showing signs of a fizzle. The daily chart below shows the latest pullback in mid-May after failing to reach the previous high from January and February. The low in June and reversal higher immediately bring to mind a
possible Inverse Head and Shoulders. A break of the neckline near 2.73 would bring a price objective of at least 3.60. That would certainly make the bull case. But it is weakening, printing a Dark Cloud Cover candle pattern with the Relative Strength Index kinking back lower. Moving out to the weekly picture shows the latest week pulling back at the center-line of the old symmetrical triangle and lower than the previous high. Non of this precludes the breakout of Natural Gas higher. But equally as important none of it is a buy signal either. There is at least a basing going on. That basing could reverse higher or as we have seen many times in the past few years it could as easily continue lower. There is nothing to do here on the long side until the January to February high is taken out.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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