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Is Natural Gas Fund Ready to Pop?

NEW YORK ( TheGoldAndOilGuy.com) -- The United States Natural Gas Fund (UNG) recently caught my attention. While it was in a significant downtrend for the better part of a year, it has recently been consolidating right under the $20 level.

A look at the daily chart shows a long move down and then, recently, a sideways consolidation pattern. While this is typically a continuation pattern, I am beginning to think that the next move may be up, rather than an extension of the previous downtrend.

  • Over the last two weeks, there has been significant support above $18 and significant volume.
  • The $20 to $20.50 level has been tested multiple times and the more tests it undertakes, the more likely it is to break.
  • Both the 20-day and 50-day moving averages have turned upward and UNG is trading above both.
  • If we zoom in a bit and take a look at the hourly chart, we are presented with two scenarios

    1. The rising wedge holds and UNG breaks through the $20 to $20.50 resistance level on high volume and a new long-term up trend is produced.
    2. The head and shoulders pattern within the wedge breaks downward and the downtrend resumes.

    I'm leaning towards option one but will be waiting for a breakout confirmed with volume in either case.

    This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

    Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.

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