Tuesday, 25 June 2013

Technical Analysis with EE Stock Charts : UNG

(This post is for educational purposes only - to show how EE Stock Charts (or RT Stock Charts) can be used for technical analysis. It in NO way offers any investment advice).

Chart Observations:
- Notes - screen prints are taken from EE Stock Charts; blue arrows and text were added with paint.net

The two charts, taken together, suggest that there could be a bounce up in UNG when the price hits about $19.00 because:

- Two trendlines are about to intersect - the current short term down trend-line and the lower 2 month channel line
- The stock tends to bounce up when it becomes overextended for several days. This means waiting for price to close below the lower bollinger band for a couple days. And this is still below the current price.
- Recently, Price seems to change direction when the stochastic line starts to change direction and 'approach' a cross above 20% (or below 80%). This hasn't happened yet, i.e., the lower right yellow arrow marks a potential move up in the stochastic blue line.

This analysis could turn out to be incorrect if the above patterns change. But it is an alternative to fundamental analysis. Fundamental analysis would take into account the following factors:

- Next Thursday's EIA reports
- The future price of substitutes, such as coal
- Upcoming US weather forecasts, esp, the next two weeks, and the risk of hurricanes in the gulf
- The change in the natural gas rig count and the probability of reductions in natural gas output
- The level of nuclear power plant outages
- Evolving US energy policy
- The diffential in US and international natural gas prices
- The timing of future liquid natural gas exports

Technical Analysis does not consider these issues as it assumes that all the above factors are reflected in the price action which reflects market participants' best understanding of fundamental factors at any point in time.

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