Natural gas price prospects: do you want it plainly stated - or sugar-coated?

Natural gas ... UNG .... Do you want my views plain, or sugar-coated?! I'll tend toward plain, okay? First, there are reasons to think UNG needs to get more under $9.00. Second, it's rare that price so neatly drops into a daily low from a yearly drop, without more daily chop. We should expect more choppy action in this price area. Either as this being another smaller wave 4 area before final wave 5 down is done. Or as a wave 1 up that's retested by a wave 2 down. Or both. Third, the volume on Friday was less than the selling volumes the previous days - so we're still not seeing the bullish buying volumes I've been talking about needing since the testing around $12.00.

If by some miracle that did mark "the low" - which I'm doubting that it did - if you were buying or holding based on Friday - then keep it simple (back to the KI$$ principles): set a stop loss and stop out if price violates it. Trouble now is you feel like price is already finally near the low. What I want to see swing buyers doing, is wait until there's a reason to think price hit target, and then look for a trigger day up. Was Friday a trigger day up? It could have been, but price didn't actually hit the mid-$8's as Trader Brian described, nor the $8.35 that was the NAV another reader pointed out. Given that NAV was $8.35 before $NatGas poked lower down on Thursday-Friday, one must wonder - and also check that UNG fund site that the reader cited in that comment at my UBTNB3 blog. The other clue that, despite the price move, Friday probably wasn't the trigger day, was that relatively low volume I mentioned. (If you disagree, then as I mentioned, just be careful to stop out to avoid loss - you can always re-enter later when you have assurance that there's a trend reversal.

This is the real message: when you're trying to identify and then buy a bottom in something like natural gas that's been trending down and down, you need to understand that you're looking for a trend reversal. There are certain ways to identify and confirm trend reversals. I've described a few of them at my NB3 site, and there are various described at places like the Stockcharts.com Chart School. The savviest swing traders won't buy a stock or ETF long, when it's been downtrending like UNG, unless and until a trend reversal pattern has printed out and confirmed, so they can have great confidence they'll start and remain in the money for the move up. One day up like Friday is only one day - normally, most trend reversal patterns in the daily-bar swing trade time frame take at least 8 days to play out. So even if the low last week was the bottom, it's too soon to call it a trend reversal.

We thought we had a trend reversal in UNG at $12 because after reaching that triangle-measured-move target, it printed a small 5-wave pattern up to look like a first wave up, then did a perfect .618 (wave 2 type) pullback, then pushed up again with some more volume. BUT - the buying volumes never were great - and then, it "broke" when it fell under that area around $12.25 that should have been the wave 2 support. So it negated the potential trend reversal, and resumed its downtrend.

I know this can't be fun to read for those who already got in. I just don't want to sugar-coat this, because of the risk that last week's low wasn't enough. If already in, don't be afraid to stop-loss out if last week's low is taken out and plan to re-enter when you have better confidence the tide has turned. We'll continue to keep an eye on this - there are lots of people out there who will buy (and buy to cover) when they see trend reversal too. When that happens, you'll finally see what I'm talking about in terms of volumes!

I want to refresh the trendlines on my monthly $NatGas chart - but the analysis above stays the same.