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EnvestorFirst (< 20)

The Play Is Natural Gas $UNG $UNL



October 24, 2012 – Comments (0) | RELATED TICKERS: UNG , UNL

Natural gas has been in a major glut due to localization issues and a surplus of supply due to hydraulic fracturing being used in horizontal wells, specifically shales such as the Marcellus Shale and the Haynesville Shale. This surplus finally lead to an initial bottom for natural gas in April of this year when we covered T. Boone Pickens calling a bottom. This lead to a 50%+ move since then giving many of our followers substantial gains over the last six months. Is the rally coming to an end? We don’t believe so, read on and weigh in on it yourself. 

A major bottom is significant for two reasons, both equally important for trading.

The low price is in placeThe market should trend higher for an extended period of time

Thus is the case for Natural Gas. The weekly chart below shows that Nat Gas has been in a bear trend for 6-1/2 years. During this time the price of the nearby futures contract has declined from a high of 15.780 (Dec. 2005) to a low of 1.902 (Apr. 2012), a decline of 88%. I think this qualifies as a bear market.

The daily chart now shows a decisive and massive complex H&S bottom in the March 2013 (and all other) contract(s).

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