UNG
's hourly chart shows both a double top and a double bottom pattern. Neither of them has reached their price target, yet. There's also both a rising (intermediate term) and a falling (short-term) trend channel visible. On the face of it, the bearish patterns seem to have a bit more credibility: Double tops have a higher win rate and a higher profit factor than double bottoms, though both are very profitable. And the down trend is the more established of the two trends.
That said, the more recent signs point to strength. The EIA has just published weekly storage numbers, which proved to be higher (more bearish) than anticipated. In my experience, natural gas fundamentals are often confounding, and when there's a logical tension between a fundamental signal (bearish, in this case) and the reaction to it (price is up since the EIA announcement), I trust the reaction more than the signal.
So, long UNG calls. My first target is $7 (or $6.99), as the chart suggests.
Trade closed: target reached:
I am closing my $7 short-term calls. It was a profitable trade (60% return), but it got more dicey than I expected. I had to wait a lot longer for the breakout move than I thought, and suffered theta decay during that period. If UNG's IV had not been exceptionally low, this would have been even worse.
Comment:
I am not leaving a runner with a trailing stop to tail out of this trade. Natgas futures are within one percent of the declining 200-day EMA, which they haven't touched all year. I believe this might slow any further advance.
Comment:
Just waiting one more day would have taken this from an okay trade to a great trade. C'est la vie.