Important Inventory Report Tomorrow for Nat Gas

From the April low at 1.902 to the July high at 3.277, nearby natural gas appears to have started and completed its initial upleg in a new bull phase. All of the action since the July 21 high at 3.277 to the Aug 13 low (so far?) thus represents a correction of the upleg and/or a secondary trend reaction against the newly dominant uptrend.

After a vicious intermediate, long-term downtrend, the first reaction (corrective move) can be, and usually is, a nasty affair that emotionally makes holders and would-be holders of long positions doubt their analysis and optimism.

It is fair to say that the 17% decline since July 21, which also represents about a 40% correction of the entire initial upleg, already has satisfied the requisite definition of a "nasty affair."

And it could get nastier, especially if tomorrow's inventory data triggers another panic bout of long liquidation that presses natural gas to the 50% corrective support plateau at 2.600, and/or to test the Apr-Aug support line, now at 2.46/45.

What to do?

The critical key near-term support demarcation level is 2.72-2.71, which, if violated and sustained on a closing basis, will argue that the correction process has some unfinished business on the downside. The equivalent levels for the United States Natural Gas (UNG) and the ProShares Ultra Long DJ-UBS Natural Gas (BOIL) are 18.39 close only, and 40.60 close only, respectively.

If these stop levels are violated on a closing basis, I will need to get out of harm's way, even if only for a day or two, to re-access the price weakness, which will have broken and sustained below prior "neckline support" of the multi-month base pattern in natural gas. This will force a reevaluation of the big picture price action in order to determine the likelihood of a full-fledged retest of the 2.00 to 1.90 lows.

  • Action-Oriented Trade Set-Ups in Stocks & ETFs
  • Macro Analysis of the Broader Markets
  • Detailed Technical Guidance for each Trading Idea
  • Live Interaction w/ Mike & Our Member Community
  • And Much, Much More!
Join Now! - Special Offer!
Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

Have Mike's “Out Front” morning analysis delivered FREE to your email inbox twice weekly!