# Natural Gas ending downtrend?



## Tradesurfer (16 June 2009)

Today was an interesting day in that the US Dollar was stronger, the US Markets were down, and for the most part across the board commodities were lower after moving higher for a couple weeks.
One anomaly for the day was Natural Gas which saw a move higher and has started to show signs that maybe the prolonged downtrend may atleast be resting which makes it an interesting item to put on traders watch lists incase it can show some bullish strength and potentially trend higher.
Using the US Market traded Barclays IPath ETN or Exchange Traded Note Symbol:GAZ , which looks to mirror the performance of the natural gas contract traded on the NYMEX, allows non-commodities investors a way to trade those products within a normal brokerage account. 
Natural Gas essentially has followed the trends of Crude Oil in that we saw an unbelievable run up and a subsequent fall. In fact while GAZ hit a high of close to $84 in June of 2008, it current stands at just $19.04. Back in July of 2008 the my indicators signaled a short entry at $73 and maintained that position until mid May of 2009 where a long signal was generated around $20.
Optimizing Entry Points: Next Signal Soon? 
Looking at the chart we can see the long signal or short exit given recently followed buy a quick sell signal. This is a great example of why indicators should be used as a guide but traders may not actually take every signal. While closing out the short position from July ’08 after capturing a huge downtrend was a good signal as we never know how long trends may last and we can always put positions back on
Now notice the previous or most recent highs around $22 (black line drawn above). Many traders might try and optimize their long entry and wait for price to close above those recent highs. This provides a couple of benefits in that one doesn’t have to worry quite as much about whether price will reach those levels and then bounch back down plus once price closes above $22, this gives traders a nice area where they might place their stop orders below as this would be a new level of support. If GAZ winds up trading in a range for a while, one might expect prices to keep running up to those recent highs so clearing them may be important.
Price Compression
Finally, when we see a series of lower highs and higher lows it forms what I like to call “Price Compression” in that you notice the daily bars on the chart starting to get funneled towards a decision point which can be seen within the triangle. 
So for now I will be adding this to the watch list and waiting to see if there is an entry opportunity. Where is Natural Gas heading? Who knows, but those who trend trade look to set conditions for entry, manage risk, and then keep losses small while riding trends until they stop. We never know which entries will yield which results. 
Generally I like to only risk 1% of my trading account. I do this by taking the distance between my entry and exit point which I define by subtracting my entry price minus my exit or stop price. So for example if that winds up being say $2, then whatever 1% is of my trading account I divide that by $2 and that helps in choosing how many shares I might purchase. Risk management cannot be stressed enough and the imporatance of taking small losses cannot be underestimated.

Regards

Derek


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## CanOz (16 June 2009)

Finally some more posts about EFTs, well done Tradesurfer. Been keeping a lazy eye on this one too and will add it to my stable of commodity ETFs very soon.

Cheers,



CanOz


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## Pager (16 June 2009)

Another ETF you can use for Natural Gas is UNG, this IMHO is by far the better ETF for trading NG, UNG does big volume and mirrors the price of Natural Gas very well, GAZ is good but volumes traded are small, only did 3000 last night UNG did over 600,000.

I went long last night at $15-35.

Trades on AMEX


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## white_goodman (16 June 2009)

Pager said:


> Another ETF you can use for Natural Gas is UNG, this IMHO is by far the better ETF for trading NG, UNG does big volume and mirrors the price of Natural Gas very well, GAZ is good but volumes traded are small, only did 3000 last night UNG did over 600,000.
> 
> I went long last night at $15-35.
> 
> Trades on AMEX





i would have gone long at $15 and exited around $18 for UNG (when it gets there)....but my IB aint setup yet


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## Tradesurfer (16 June 2009)

While I am primarily a technical trader, a potential catalyst may be if we a powerful or hurricane in the US which is perceived to disrupt natural gas facilities. But I'll leave that for the fundemental traders out there to discuss.



But like I said I am waiting for it to breakout above the most recent highs in order to better optimize an entry even if my proprietary indicator gives a long signal (on the original graphic= reading of 5)

We'll have to keep an eye on this one and it may base or sideways trend. Better to follow price.

cheers

Derek


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## jman (18 July 2009)

Hi

This is my first post!

I saw your comments about buying into UNG ... I was wondering if you could give me a bit more info about how one can trade this natural gas product. Who do i trade it through, contract specs, etc?

cheers, jman


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## wayneL (18 July 2009)

jman said:


> Hi
> 
> This is my first post!
> 
> ...




You just need access to US STOCKmarkets http://finance.yahoo.com/q?s=ung


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## baboon (18 July 2009)

Hi guys, just wanna let you know of a potential problem with trading UNG.  I havent confirmed this info but there is something about the UNG fund filing for permission from the SEC to issue 1 billion new units, adding to the already original 200 million units approved.  Basically it means the net asset value of the UNG should be around 11.85.

Here is a clip you can watch http://www.youtube.com/watch?v=jHHiTq3uUsU

Hope that helps some of you!

Good luck.


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## Tradesurfer (27 July 2009)

I tend to use a different vehicle. US Market but use symbol GAZ which is an ETN tracking natural gas prices from Barclay's


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## gfresh (28 July 2009)

Good find, although doesn't really seem to have broken up yet from June. 

Volume seems to be building, seems to have come off a very low of ~$14 .. seeing as we have a lot of natural gas plays here in Oz, is an important one to be following I guess..


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## Tradesurfer (2 August 2009)

Still in an overall downtrend. I'd really like to see this close above $20 as we haven't seen a higher high in quite some time. Good example of how price trends are important though as quite a few people have been saying that Nat Gas is undervalued for some time but until price confirms we're still in a downtrend.

I think I may be repeating myself but while I am a technician, a fundamental catalyst could be a major hurricane hitting the us which quite often spikes prices.

I've got this on the watch list but unlike oil which put in a bottom stay tuned on nat gas


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## jonojpsg (3 September 2009)

I'm just getting into trading natural gas but doing it through IG - is that a bad idea?  Not sure about volume traded, but my current question is

Why the NOV contract price jumped from 2900ish to 3900ish at open the other day, and why the OCT contract price has not followed, still sitting at 2680ish??  

ANyway, I've jumped on long to see what happens, testing the waters so to speak.  Gas has to switch back to correlating with oil at some stage doesn't it?  In which case, there's a big lag to make up over the last few months.  At least that's what I'm banking on


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## wayneL (3 September 2009)

jonojpsg said:


> I'm just getting into trading natural gas but doing it through IG - is that a bad idea?  Not sure about volume traded, but my current question is
> 
> Why the NOV contract price jumped from 2900ish to 3900ish at open the other day, and why the OCT contract price has not followed, still sitting at 2680ish??
> 
> ANyway, I've jumped on long to see what happens, testing the waters so to speak.  Gas has to switch back to correlating with oil at some stage doesn't it?  In which case, there's a big lag to make up over the last few months.  At least that's what I'm banking on




It didn't do that on the actual futures jono. 

http://charts.quote.com/cis/qc?cont...showextendednames=true&showdatainheader=false


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## WilliamKong (21 October 2009)

Pager said:


> Another ETF you can use for Natural Gas is UNG, this IMHO is by far the better ETF for trading NG, UNG does big volume and mirrors the price of Natural Gas very well, GAZ is good but volumes traded are small, only did 3000 last night UNG did over 600,000.
> 
> I went long last night at $15-35.
> 
> Trades on AMEX




It seems like UNG is forming the base recently. And natural gas went up by more than 7% yesterday, so i suppose the uptrend can be seen if UNG breakthrough $12.21 (the 4-week and 12-week's high). But can consider to place a stop loss around $11.


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