June 30, 2009 - update on HNU

Today HNU dropped on large volume due to an unfavorable report from the EIA stating that "abundant natural gas supplies converge with weak demand driven by an 8-percent decline in industrial sector consumption."


Although I do like Nat Gas as a long-term play and believe that it will do very well when we are out of the recession and well into recovery, I have to keep to my trade rules and technical signals. My stop-out target is below 5.50 and today I came close to getting stopped out.

We have unsuccessfully tested the 50day moving average, and that is bearish. However, counting today's move, we have also re-tested the 5.50 support level 3 times in the past 2 months and stayed above it.

Let's take a closer look with the 2-day chart, broken down in 5 minute intervals:

The 5.50 support line was tested twice during the day but proved to be strong. However, we are not out of the red zone yet.

I have given this trade time to work but it is starting to go flat. I will look to the next trading days for signs of support, otherwise I will close out the position and stay on the sideline and prepare for another approach in the future.

June 8, 2009 - Trends in DIG (Ultra OIL and Gas)

I was looking at DIG over the weekend and noticed very distinct technical patterns in the daily chart. Let's take a look at the chart:



On the left side a very obvious head and shoulders pattern is visible. A horizontal line has been drawn to indicate the relative top of this pattern to mark a resistance line for the uptrend forming at the right side of the chart.

Even though the trend has formed a nice channel to the upside, I wonder if it will continue to climb. Here the resistance line at around $32 will serve as a very important mark.

At the bottom of the chart, the MACD traces a bearish pattern - it has formed a higher "hump" at the May 11th top compared to the lower one formed around June 2nd. RSI is not indicating over-bought levels, although it has been above the center line for more than a month.

I own DIG in my portfolio and will look to close the position for profits at these levels if I see signs that resistance will drive the price lower.

June 4, 2009 - intraday HNU.TO

HNU has been a hot topic in this blog and others over the past couple of days. I've seen many articles on nat gas and heard traders talk about watching this commodity closely.

This morning at 10:30am, the nat gas inventories reported an increase nat gas storage, which drove the price of HNU down to a low of $5.46. To see intraday action better, I've posted the chart below which shows a monthly chart of HNU, plotted on an hourly basis.


Most trading books, tell new traders to put their stop-losses just below the previous low. In this case, this would be at $5.50, a couple of ticks below the low of $5.53 on May 26th. This morning HNU went down just enough to hit these stops, only to bounce back.

Let's see how the rest of the trading day plays out....

June 3, 2009 - followup to HNU.TO

Today was an interesting day for HNU. The price dipped below $6 intraday, resulting in a single day drop of around 20%. Buying opportunity or time to run away?!?!



Even with today's drop we are still technically within the uptrend channel. Today the price touched the short-term uptrend line (drawn in blue) and bounced off it - however, this is not yet a clear signal of a strong trendline. More support is needed.

The chart has created a triangle pattern at the right side, squeezing the price between the trendline and the 50day SMA. The next few days will be a good test to see if the bulls will take-over and push the price through the 50day SMA or if the bears still have a strong presence.

Tomorrow at 10:30am the EIA will announce the Nat Gas inventories, which will no doubt effect the prices, so keeping the current chart pattern in mind, look for swings and false breakouts.

June 2, 2009 - HNU.TO Consideration

Natural gas is one of those commodities that has taken a massive beating over the past year. I've been following the ETF that tracks Natural Gas on the TSX: ticker HNU.TO

With the current changes in the market and the return of cautious optimism to investors I am looking to get into Nat Gas. There are fundamental reasons why the price of Nat Gas doesn't make much sense below $7, but I am not about to go over the fundamentals here. All information is reflected in the price action. Let's take a look:



Above is the chart of HNU.TO drawn with a 200day (red) and 50day (blue) SMA. I've drawn the lowers trend channel for the downtrend, and the 50day SMA has served as a very effective ceiling to the downtrend. However, in the recent days, we have seen a test of the 50day MA which failed, BUT here we are going for a retest. Given the recent volume, it shows many have returned to trading this ETF.

The RSI is near 50, which does not indicate an over-bought position. MACD has been trending higher for a while in a tight range.

I am looking at this for a long term trade as comodities usually set up long-term runs when the trend changes. I will look to build a small position here, and add near the $6.50 line.