Wednesday, September 02, 2009

Natural Gas (UNG): Trainwreck

I know readers are probably getting tired of me posting UNG charts, especially since I've been so wrong about it over the last two weeks, but I am just amazed by the price action there. This isn't some crap company like FNM or AIG or BAC or CROX, this is energy! Natural gas has completely collapsed despite the stock market bubble, collapsing US dollar and the continued reports of the recession ending. I look at the chart above and my jaw just drops. Yeah, I've lost money on UNG, but thats not why my jaw drops. I just never in my wildest dreams would have expected natural gas to drop so much and I bet I'm not alone in that belief. Fortunately, even thought I was initially bullish on UNG months ago, I turned bearish after seeing weakness. With the most recent plunge on increasing volume I suggest that this is the final capitulation that natural gas needed to form a bottom. While there is obviously no bottom here yet, we must be very close.

Disclosure: Yep, I still own UNG calls. Like a chump.

1 comment:

Gridlock said...

DeutscheBank is shutting down DXO. It's only a matter of time before the CFTC or SEC limit the number of contracts that UNG can hold. So best not to play in after this run.

However, based on today's price action thus far...I feel like this thing is going to pop back up. The shorts will have to cover quickly if the fund gets shut down.