I haven’t written much lately about my Trend Exhaustion system, which follows the well-known Tom Demark indicators such as ‘Sequential’ and ‘Combo’. With the end of December, the natural gas ETF ‘UNG’ has signaled an ‘Aggressive Sequential’ buy.
UNG has been one of the worst performing commodity ETF’s, falling from its 2007 IPO price of $400 to currently $14.96. UNG reached the ‘Setup’ phase in 2012, and I’ve been waiting since then for either ‘Combo’ or ‘Sequential’ to trigger. As this is measured on a monthly basis, this presents a long-term buying opportunity.
These indicators (Sequential and Combo) identify turning points across the stock, bond, commodity and currency markets. They are intended to signal the end of a trend, and the start of a new trend in the opposite direction. ‘Aggressive’ versions of these indicators can be early, so it wouldn’t surprise me if UNG has continued weakness for several more months.
But sub-$3 natural gas does not appear to be sustainable in the long term: U.S. Natural Gas Economics: $4 Works; $3 Is Too Low
The UNG ETF itself is not my preferred natural gas play. The ETF has been well criticized for performing even worse than the commodity it is supposed to track. So I’m looking into beaten-down natural gas stocks. Also coal, which has long-suffered due to natural gas competition, could benefit from higher gas prices.
/This Trend Exhaustion spreadsheet is available from the Research Offers page.