Fairlead Strategies Idea Generator

United States Natural Gas Fund (UNG)

The strong downmove in natural gas that has been in place for several weeks is now showing signs of downside exhaustion. With a setup for a meaningful oversold bounce in place, we recommend a long position in the United States Natural Gas Fund (UNG):

• UNG registered a short-term counter-trend “buy” signal from the DeMARK Indicators® today that supports an oversold bounce in the next two weeks, at a minimum. Short-term momentum has improved enough to generate a daily MACD “buy” signal supporting a rebound, with little resistance offered before the 50-day moving average ($16.65).

• DeMARK Indicators® on UNG’s weekly chart also support a positive oversold reaction, as they are likely to produce an intermediate-term counter-trend “buy” signal next week. Additionally, the downmove over the past several weeks has led UNG to become newly oversold on a long-term basis, aligning the three timeframes.

• Our target for UNG is $16.60, near initial resistance offered by the 50-day moving average, which we advise following closely as it is falling at a brisk pace. A stop-loss can be placed below long-term support near $8.90, which is ~12% below the current price but palatable from a risk/reward standpoint given the sizable upside opportunity (~68%).

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United States Natural Gas Fund (UNG, $10.13)

Target: $16.60

Stop-loss: $8.90