Natural Gas May be Bottoming…or Not

• Posted by Greg Harmon
• on January 26th, 2012

Natural Gas, $NG_F, had a major burn off at the end of the year and into the first 2 weeks of 2012. This topped off a really bad back half of the year. But it has bounced hard the last 3 days. Is the bottom in? The daily chart below shows it has a long way to go before declaring a bottom and a new move higher. But there are some encouraging signals. The long white candles, the Relative Strength Index (RSI) rising rapidly and making a new high, the Moving Average Convergence Divergence (MACD) indicator crossing positive, all on very big volume. But there are

also some signals that need to clear up. It stopped Wednesday the falling 20 day Simple Moving Average (SMA). In fact all of the SMA are sloping sharply lower. If it does not continue higher above the December bump it will have created a weak signal Momentum Discrepancy Reversal Point, with the RSI making a new high without price doing the same. A bearish indicator. The picture does not get clearer if you back out to a weekly view either. The Andrew’s Pitchfork

shows a breakdown below the Lower Median Line and now a retest. If it continues higher then there appears to be a lot of overhead resistance between 3.80 and 4.00. But hey that is a long way up. The downside view comes from the big picture with the trend clearly lower. And before you start to say that you only trade stocks and ETF’s not futures take a look at how good the fit is of Natural Gas to the United States Natural Gas Fund, $UNG. Playing this with the $UNG is

not nearly as bad as you have been led to believe. The candlesticks are the $UNG daily prints and the blue area background is Natural Gas.

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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.

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