Guys/gals.. thanks for all the e-mails/comments. I have received quite an interesting bunch! Keep em coming. For those trading UNG, I think it's really important to look at the Natural Gas Futures as UNG is the derivative of it. When I am explaining % plays in Natural Gas, just add them to UNG.
I.E. If I think Natural Gas will have a 10% up-move, add 10% to UNG's price for a approximation and 20% to HNU.TO. The thing is that HNU.TO will do 200% of NG, while lately UNG rarely does 100% of NG, hence why I prefer HNU.TO.
Summary of this post and what to look for during the Week of August 17th: This post is quite long, and if you don't have to the time to fully read it, all you need to know is that we are in a long-term downtrend + we are sitting at support. If the support breaks from 3.15-3.20, then NG prices could face some serious selling pressure, and bottom out quickly sub $3.. If 3.15-3.20 holds next week, I'm a buyer for a quick 15-30% flip to the upside with HNU.TO/HZBBF.pk.
Michael Pena e-mailed me an interesting chart which I wanted to show you guys.
It confirms the downtrend I am talking about, but it also shows that we are at major long-term support which we don't know yet if it will hold. I am still bearish until the charts tell me otherwise. I do not pick the bottom/tops. I've learned from following the SPY it is futile to decide WHEN the bottom should occur. .. Enough talking by me, here's the chart.
In his e-mail he also wrote
"[We are in the 5th wave of the EWT], so the bottom should be near for natgas. The rule for this long drawn outdrop will also give it a swift and fast move upward, so Im ready with mytrigger finger. The lowest I see us breaking would be 2.70 give or take. Like you & I think HNU.TO would be the better ticker to play [when debating to use UNG/HNU.TO], but our U.S. players are not able to play it. Even with HZBBF.pk you can only play it through TdAmeritrade.
(From the chart) The lines of support also have a corresponding parallel line for its major resistance.
Also, notice in 1996 when nat gas was under 1 dollar. Well I dont think once natgas moves up [and breaks it's upwards trend.. that we'll see 3$ ever again]. My belief is that this will go back up[..] very soon to 15[..] maybe higher. ** So imagine where HNU and UNG will be by then".
**With contango, who knows :) -zee**
Here are the futures for the next 6 months. As you can see the market has us priced much higher, HOWEVER, this is NOT good for HNU.TO/UNG/HZBBF.pk because of CONTANGO.
Sep '09 (NGU09)
3.238s
Oct '09 (NGV09)
3.638s
Nov '09 (NGX09)
4.519s
Dec '09 (NGZ09)
5.310s
Jan '10 (NGF10)
5.584s
Feb '10 (NGG10)
5.623s
Contango explanation:
By Asjylyn Loder
June 12 (Bloomberg) — The United States Natural Gas Fund, the first and largest exchange-traded fund for the fuel, attracted record volume yesterday as investors bet rising prices will reward them with a comparable return. They may be setting themselves up for a disappointment.
The fund doesn’t try to match the spot price of the commodity. Its goal is to follow the percentage change in the price of the commodity’s front month contract, said John Hyland, portfolio manager and chief investment officer of the fund. When the market is in contango, meaning the near month contract is cheaper than the contracts further out, the fund will underperform the underlying commodity, he said.
Investors see “natural gas” in the name of the fund and assume the fund mimics the commodity’s performance, said Paul Justice, an ETF strategist at Morningstar Inc. in Chicago. That’s not the case.
“It’s a horrible investor experience if you believe gas prices will go up, and they went up, and you still didn’t make money,” said Justice in an interview. “You just didn’t do your homework. The ETF is doing what it said it was going to do. You just didn’t find the right product.”
Look at how the UNG underperformed the NATURAL GAS FUTURES. That's contago for you.
