UNG moving lower than natural gas prices not a problem in technical analysis, but traders should always remain cautious on buying a potential low

As we've seen with USO and WTIC, there can be divergences between not only the cash and futures pricing of commodities, but also ETF's especially depending on how those ETF's are composed. This is one of the reasons why I do separate chart analysis, normally for the ETF's that most people can more readily trade but also looking at the underlying. Here's a situation where UNG has moved lower than in late April, while the $NATGAS chart has not. It certainly is possible for UNG to bottom before $NATGAS does. Volume was pretty good again today, whether you chalk it up to capitulation (whether price-based or because of the ETF-related news reported by Bloomberg as posted earlier (thanks to one of my alert readers!) or short-covering. Notice the daily indicators have not crossed up yet! And remember that it remains possible for the actual target to be more like $10.50-$11, although I really think it's $12. Maybe it gets there tomorrow and then a trend reversal can play out. If you are looking at this, you really need to be truthful with yourself about your trading style and whether it's something you want to do.

The other thing I want to point out is that $NATGAS actually remains above the long-term trendline and it is possible that it will get there, unless it wants to play out a truncated low. It's also possible that it meets that lower t/l later, in time, rather than sooner via a lower price. On the monthly chart I cannot provide a precise trendline and therefore cannot quote the price to the penny where it would meet that t/l - it just looks very close to $3 right now for $NATGAS. Almost 20% lower, not insignificant. It's another reason to think about which vehicle you use - if you want to buy UNG (or buy to cover), I think you want to go with the Elliott Wave analysis that says $12 should do it. If you want to trade in $NATGAS then you may prefer to look for one of two things: either a good test of that trendline somewhere about $3, or a solid trend reversal pattern that starts showing higher highs and higher lows on good buying volumes.

The main reason why I recommend traders be careful in trying to pick a bottom to buy, whether UNG or anything else, is that it's always possible for the actual low price to be somewhat under where you're coming in, and it can be frustrating waiting out a trend reversal pattern even when it does show up. That's why many swing traders prefer to wait for that first good push up, followed by a pullback and then a buy entry for the next push higher. (Of course, that's what kept a lot of swing traders out of the equities rally from the March lows - that obvious pullback never showed up!) In the case of natural gas, my sense is that we are going to see a moderate - tradable but moderate - wave 1 up, with a wave 2 pullback prior to a good wave 3 up. Okay - enough of natural gas for today! Will keep an eye on and tweet if I see something special there, and post at UBTNB3 from time to time. If I see more that's significant to really point out to more readers then I'll do another update on natural gas here also.