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June 04-2010 Natural Gas Update:
Wow.. huge moves are being made.. $4.40-$4.50 played both support/resistance in 2010.. as soon as we broke it we immediately rallied back-to-back in the futures prices to $4.90.. The whole point of technicals is to preserve capital. If resistance lies at $4.40.. keep the stops 15 cents above..
Short-Term Trend:
The short-term trend for natural gas is now up. However, I do not recommend anyone playing it... the most money is made from the main trend which is down.. if you look at natural gas the past 2 years all it has done fall 30% and rally 25%.. Note, resistance now lies at $4.90-$5.00.. if you like to gamble.. take a short at $4.90 and set the stop at $5.05.. risk = 15 cents.. reward = $4.50 which is 40 cents.. that's 2.67 to 1 odds.. not my cup of tea.. but hey it could work out.
Long-term Trend:
The longer-term trend is still down until we break the previous highs at $6.00.. one should not be going long HNU/UNG.. but rather waiting patiently for optimal short entries.
In April, shorting natural gas at $4.40 and covering at $4.00 proved to be quite profitable.
We are not trading at resistance at $4.90. IMHO, it's a bit risky to start shorting heavy natural gas right now given that the Charles Dow Theory is signalling a short-term uptrend for natural gas..so I'd suggest to wait for an overextension to the upside and then short... Capital preservation is key.. Only short when we break the uptrend line... i'll let you guys know when that happens.
So... the next levels of resistance lies at $4.90 and $5.25
I think it's possible we get there but I wouldn't go long to those levels (if you really want to, invest in a quality natural gas company.. not the futures...)...rather
BULLISH NATURAL GAS CHART:
Some of you may be wondering ' what just happened in the NG markets?? '.. well technicals explain this situation very well... low volatility is usually followed by big volatility... I did mention here, http://abcsofgas.blogspot.com/2010/05/told-you-soo.html#more, that high volatility in the bull direction was possible.. for those too lazy to check I have attached the image to this post + showed my comments.. the reason I'm posting this is because I think a lot of people were caught off-guard in this squeeze.
May 6th, 2010:
A break of $4.40 would lead to a reversal. The most money is made on breakouts.. That's what I'm waiting for.
