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Wednesday, January 3, 2018

The Bottom In Natural Gas - Market Update 1/3/2018 - advanced charting, and trading, techniques

 Tweet from Dec 12th, 2017, where I called for a final shakeout (bottom) in Nat Gas - Elliott Wave Chart included.

 This isn't the first time I've been right on NatGas; I remember calling the bearish reversal years ago, and I've remained bearish ever since, but this seemed way too easy. Typically you'll be early, or wrong, several times before finding a tradable bottom in something as volatile as Natural Gas, and getting it wrong a couple times, doesn't make you a bad technician. It's just part of the process of finding a tradable bottom.... Most technician are early, and that's because sentiment takes time to reach an extreme, and most traders don't have the patients to wait for the "final washout", or worse, they turn bearish when they finally see it. I made this mistake in 2008, even after calling the bottom target on the $SPX, I was unable to get bullish enough, stay bullish, once the market reversed, into one of the most massive short squeezes in history. This is where the rubber meets the road, because even after charting it correctly, and making an accurate prediction, you need to be able to trade it correctly, and that requires a tottally different skill set... but now I'm getting way off topic. 

My mantra is "Chart Everything", so you don't miss a thing, but that also means charting several timelines - long term, short term, intermediate term - and analyzing those charts with an unbiased view. Some times I'll even create 2 separate folders - per sector - to compare the bullish view to the bearish view, when charts conflict with each-other, as they often do. For example I'll label one set of charts, "Bullsh Dow", and the other "Bearish Dow". This is a tall order, and something I've written little about, because I know it's confusing to most people, but this is one of the best things you can do to help you become a better annalist. Comparing the $VIX action to the market action is another... Just yesterday, I saw a possible outcome in the charts I didn't like, and had to check the $VIX chart in order to confirm the bullish trade. I was afraid we may see another washout like the one we saw going into Friday's close, but that was quickly ruled out because of the weak $VIX. I could've devoted this entire blog to what the weak $VIX means, because it doesn't always mean the same thing, but like I said, this is confusing for most people. Most people decide they like a trade, before they chart it, or they don't even bother to chart, and this is called "gambling", or "guessing...", and that doesn't work out too well for most traders.      

 Getting back on point

Major reversals tend to happen when few expect it, so it's important to continue to watch unloved sectors, and keep your charts up to date. While everyone else was hooked on Oil, I was eyeing Natural Gas, and Silver. The bottom in Silver/ and Gold, was also not that difficult to find, but I didn't get bullish enough at the reversal. At least I haven't fought the trend all the way up, but there are lessons to be learned from all this, and there's always room for improvement. That challenge is what peaks my interest, rather than become bored with it all.

This rally in Nat Gas was not about "Frozen America", as you see every fake (manufactured) news outlet reporting, or even supply and demand.... It's about looking for a trade that's going to work on light holiday volume, and realizing short positions take time to unwind - weeks in most cases. Keep that in mind the next time you find a market reversal, and you'll have a better chance sticking with the trade that's working. I'll be revealing more advances charting, and trading, techniques in my upcoming book, but now let's get back to the charts....   

The rally in NatGas looks like it stalled out yesterday, and it's no surprise, since the fake Financial News is just now reporting "Natural Gas up 17%". That Bloomberg headline is the kiss of death for this rally, because it marks a sentiment change, and everyone who missed this big move in NatGas is about to start buying the dips - all the way down.

If you were following my twitter yesterday, you watched me block one of these fools... trying to tell me that there's demand.... Look, opinions are like a-holes, and especially when the charts are working. Where was this know-it-all - chiming in on my twitter feed - when I was calling for a rally? Now he's blocked... and placed in the contrarian camp. Yeah, I can be harsh sometimes, but this is for the good of the entire community.

If you follow my twitter you saw the updated NatGas, and $UNG, charts - looks like wave A in a snap-back rally, or was that silver? One thing is for sure, I'm watching too many sectors right now, and now I'm more interesting in catching a bigger reversal in Oil.

$WTI crude has traded into a key Fibonacci target, and the top of bearish parallel channel.

 If you're still hooked on NatGas, there's resistance right here (at yesterday's high), and again at 3.25. If it can breakout above there, I think it could go as high as 3.85, with 6.48 being key resistance on the $UNG. 

The UNG isn't as accurate of a chart, as the pure NatGas charts, but both are showing a breakout above the 50 day ma, ending with that looks like a bearish Hanging Man (possible reversal candle). The 50 day is the level to watch....

The market is poised to rally higher, after yesterday's little pullback. Seems like these happen late in the afternoon, when I'm not watching.

Watch for the $RUT to lead this time... as the market continues to be pumped, one sector at a time.

 Take Care, and have a healthy, happy, and profitable New Year!


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