Natural gas moving quickly to price target zone - time to get prepared for how to play it

Natural gas dropped again this morning, then UNG started decelerating somewhat as it moved closer to the mid-$8's area that Trader Brian kindly shared with us. Another reader, nova, pointed out the contango and the UNG net asset value at $8.35 yesterday - something else to consider. The $NatGas continuous contract chart looks to have a symmetry target about $2.50. Today, natural gas was quoted just above $2.50, with the futures contract a little over $2.60 ($NatGas). The charts are below; you can see the intraday deceleration on the hourly chart. There was even a buying spike, which may be a short-covering sign but it's still helpful to show that some big players are seeing price closing in on interesting levels, too. So what do we do?

The deceleration allows us to start picking out potential 4th/5th wave movements especially since it's common for price to get choppier as it approaches price target. New swing short positions should not be opened until the very minimum of a trigger day, closing over the prior day's high. We want to see a trigger day after the price target is met and it looks like a completed five waves down. We'll also want to see confirming indicators like positive divergence.

The move down looks parabolic, which can't last. What is possible - though not required - is choppy action that takes some while longer to finish "the low". The good part about that is that it gives some time to start setting aside some cash for either an options play, or setting long futures trades, or initiating swing longs when the right trigger presents itself.

The biggest test will come after "the low" is made and long buyers come in. What I'm talking about is, if you're already in a UNG position that's underwater, and buy more when it's finally a good time to buy again - the temptation to sell too soon with the relief of seeing green, will be enormous. It will take some real discipline and fortitude to play the swing long position on its own merits, unencumbered by the emotional pain of the prior loss. I'm putting this out there so we can all get ready for playing this as profitably as we can, when the time is right. Which seems quite a bit closer now!