Since mid-2008 the United States Natural Gas Fund ETF (UNG) has been trending down. There are now the beginning signs that it may have reached a bottom.
Recently UNG found support at the $5.00 price area having hit a low of $4.98 on January 19, 2012. A second decline found support a little higher at $5.02. Together, we now have the makings of a double bottom reversal pattern.
Supporting evidence includes:
– Downtrend has accelerated lower at three angles of descent, before hitting the recent bottom, thereby creating a fan effect
– Significantly higher volume recently, which can best be seen on the weekly chart
– Volume spikes further into a trend can signal exhaustion
– Bullish divergence with weekly RSI
Resistance of the current short-term trend is defined by the trend line and 21 exponential moving average (ema) (now at $5.56) as seen on the daily chart. The next higher trend line and 55ema mark resistance of the medium-term trend.
A breakout of the double bottom price pattern occurs above $5.98, which gives a minimum target of $6.98. At that point UNG would be above the 55ema and at or close to resistance of the long-term trend line starting from the 2008 high of $127.78. (www.etf-portfolios.com)
