Natural Gas (UNG) "Personality" Suggests Rally Will Continue

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(This is an excerpt from today's 10/25 DecisionPoint Alert article)

Natural Gas (UNG) had a huge rally today and looks bullish moving forward. We presented UNG as a "Diamond in the Rough" back on April 14th. The stop was never hit and the position, at the top, was up over 124%. Full disclosure, I do have a position in Nat Gas.

I was contemplating selling it as it appeared that a bearish head and shoulders had developed on the chart. However, after observing its "personality", I wasn't convinced this was a topping formation.

What do I mean by "personality"? Something you will notice on most technical charts is that each stock or ETF seems to have a personality, meaning the stock typically reacts a certain way within a trend. In the case of UNG, it's personality in a bull market configuration (20-EMA > 50-EMA > 200-EMA) is to pullback to the 20-EMA and rally OR to pullback to the 50-EMA and rebound. Notice that it had recently rebounded off the 50-EMA. That was enough to keep me in my position.

I had no idea it would rally to this degree, but it did and now the technicals look very bullish. The RSI is now in positive territory. Today the 5-EMA crossed above the 20-EMA for a ST Trend Model BUY signal. The PMO has turned up. Stochastics are very favorable as they had already bottomed and had begun rising even before today's big rally. Finally, we have a nice positive OBV divergence with price bottoms that led into this rally off the 50-EMA.

Conclusion: Signs point to higher prices in the short term for Natural Gas (UNG) given the bounce off the 50-EMA and improving indicators.

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--Erin Swenlin

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Erin Swenlin
About the author: is a co-founder of the website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at Erin is an active Member of the CMT Association. She holds a Master's degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor's degree in Mathematics from the University of Southern California. Learn More
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