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Don’t Miss This Explosive Breakout In The US Natural Gas Fund

ByDeron Wagner
Published 04/08/2013, 07:47 AM
Updated 07/09/2023, 06:31 AM

In this April 2 blog post, we explained in detail how to trade a bullish technical chart pattern known as the “cup and handle.” At the time, United States Natural Gas Fund (UNG) was still forming the “handle” portion of the pattern. However, since the ETF broke out last Friday (April 5), UNG is now in play as a valid swing trade entry. Here is a follow-up look at the current price action.

In our initial analysis of UNG, we said, “While forming (the handle), price action will typically slope lower. In the case of UNG, even an ‘undercut’ of the March 25 low and 20-day exponential moving average would be acceptable.” On April 4, an “undercut” of the March 25 low and 20-day EMA is exactly what happened. The following day, UNG jumped 4.5% and broke out above the high of its 3-week range. The move was also confirmed by an impressive volume spike.

This is all shown on the daily chart below:

UNG
Since this ETF closed only slightly above the highs of its range, it is not too far extended to buy near the current price level.

One of the things we like about the UNG trade setup is that it is a commodity ETF. Since our market timing model is now in “sell” mode, we are generally avoiding the long side of the market. However, one exception is ETFs with a low correlation to the direction of the stock market. Commodity, currency, fixed-income, and international ETFs are all such examples.

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