{"id":19796,"date":"2022-06-09T07:30:48","date_gmt":"2022-06-09T11:30:48","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19796"},"modified":"2022-06-09T07:30:48","modified_gmt":"2022-06-09T11:30:48","slug":"the-odds-favor-a-contrarian-move-for-natural-gas","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/the-odds-favor-a-contrarian-move-for-natural-gas\/","title":{"rendered":"The Odds Favor a Contrarian Move For Natural Gas"},"content":{"rendered":"

The price of natural gas looks ready to fall.<\/p>\n

Obviously, that’s a contrarian view. Just about all the financial talking heads are bullish<\/a> on natural gas.<\/p>\n

They’re looking for it to continue the record-breaking rally that pushed the price of natural gas up 150% in 2022.<\/p>\n

But I’m going to take the other side of that trade…<\/p>\n

The technical setup looks “toppy” to me and I see that the odds favor a decline over the next weeks.<\/p>\n

Take a look at this chart of the United States Natural Gas Fund (UNG) – which tracks the price of natural gas…<\/p>\n

\"Chart\"<\/div>\n

There are several potentially bearish<\/a> characteristics in this chart…<\/p>\n

First, the chart itself is morphing into a bearish rising wedge pattern.<\/p>\n

This happens as the stock makes higher highs and higher lows. But the distance between each high and low narrows.<\/p>\n

Most of the time, this action ends with the stock breaking to the downside of the wedge pattern.<\/p>\n

There’s also “negative divergence” on the technical momentum indicators (MACD<\/a>, RSI<\/a>, and CCI<\/a>) at the bottom of the chart.<\/p>\n

While UNG has been pressing higher over the past two months, the momentum indicators have been falling.<\/p>\n

This sort of negative divergence is often an early warning sign of a potential decline.<\/p>\n

Finally, as we noted last September<\/a> (just before a three-month decline), UNG rarely strays more than 8% from its 50-day moving average<\/a> (MA – blue line) before reversing back toward the line.<\/p>\n

Yesterday, UNG traded nearly 20% above its 50-day MA.<\/p>\n

So, it’s setting up for one heck of a reversal to alleviate its overbought condition.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Of course, these potentially bearish conditions also existed one month ago and nothing happened.<\/p>\n

UNG is even higher today than it was back then. So, natural gas bulls will argue that none of this matters.<\/p>\n

Macro conditions – like the Ukrainian invasion and increased demand for energy – will keep pushing the price of natural gas even higher.<\/p>\n

But I’ll argue that the current price of natural gas already reflects the macro conditions. That’s because the market tends to discount these factors ahead of time.<\/p>\n

On the other hand, technical conditions suggest we’re at least reaching a short-time top in the price of natural gas… and we could be setting up for a significant reversal.<\/p>\n

It seems natural gas is more likely to be lower in the weeks ahead.<\/p>\n

Best regards and good trading,<\/p>\n\n\n
\"signature\"<\/td>\n<\/tr>\n<\/table>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Based on current conditions, which way do you think natural gas will move?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

We could be setting up for a significant reversal…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19796","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19796","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19796"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19796\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19796"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19796"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19796"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19796"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}