The United States Natural Gas Fund LP or (NYSE:UNG) is building a falling wedge formation which appears to be a small part of a very large overall process of a new major building uptrend.

I did a post here at Best Online Trades way back on June 3rd 2010 on the long term natural gas futures chart where I indicated that natural gas is probably in the early phases of a new bull market trend.

Since that time natural gas and the United States Natural Gas Fund LP (NYSE:UNG) ETF has traded higher but it has been in a choppy form and has been reluctant to show significant ease of movement to the upside.  This is normal and probably is to be expected in the early part of an uptrend.  Given the total collapse that occurred in both natural gas and the (NYSE:UNG) ETF between July 2008 and September 2009 (roughly an 80% crushing bear market decline) it is perfectly normal to see the (UNG) take its time to build a new foundation for an uptrend.

As stated earlier, the daily chart of (UNG) shows that it has been building a falling wedge of roughly one month in duration.  It recently broke through the 7.7 range of support but today was significant because price snapped right back up to the top range of support.

Not only that but today’s big wide price spread candle on big volume engulfed the last 4 narrow range day candlesticks, two of which were dojis.  This is a bullish sign and a signal that this wedge may be nearing completion.

Also significant is the 7/12/2010 candlestick print on the (UNG) ETF which was a record low volume day for this ETF since very early 2009.  A record low volume print like that would be very concerning to me if this ETF was trading higher after a tired uptrend.  But the exact opposite can be said in this case (The UNG is testing bear market lows and only slightly breaking under recent support).  So this low volume is telling me there exists selling exhaustion or weakness at the bottom of this falling wedge.

Also noted on the chart is the series of higher lows, another bullish sign for a potential new upside breakout trend in the (UNG) ETF.  Again, the early part of any uptrend is going to be choppy and cumbersome.

We are moving in an interesting seasonal time frame for natural gas futures as well.  According to both the 10 year and 17 year seasonal chart of natural gas futures we see that the full months of September and October are the two strongest months for this commodity.  So roughly 1.5 months from now we are in the strong seasonal time frame.

Chart source: Spectrum Commodities

I like this falling wedge pivot and will be looking to go long for a while on a breakout from the pattern.  I am thinking this could have potential at making it to the 10 to 11 range  by end of October if the seasonals kick in and the trend gains some strength.  That may be too optimistic but it is going to be interesting to see how the (UNG) reacts out of this pattern.

The daily histogram is also confirming a buy signal today. 

Usually after a big up day like today there is some type of retracement.  The action next week may reveal some better clues.  But right now I like the setup and the large pattern and the seasonal pattern for the next 3 months.  This may be a better setup and either gold or the broad market or most everything else for that matter…

Written By Tom From Best Online Trades

BestOnlineTrades covers many different aspects of trading, from commodities to stocks, from indices to ETF’s.

Here are some recent interesting Natural Gas articles:

Natural Gas ETFs Are Headed Higher… And Here’s Why (IEO, XOP, UNG, FCG, FCGL, FCGS)

A Method To Approach The Natural Gas ETF (UNG, USO, FCG, UNL, GAZ, IEZ, WCAT)

Matt McCall: Sizing Up Energy ETFs (XLE, OIH, FCG, WCAT, FMO, AMJ, CHIE, EEO, UNG)

ETFs offer an easy way to play Natural Gas and there are many options available besides the most popular US Natural Gas ETF (NYSE:UNG).  We have listed some other options for investors to look at and compare to one another below.  Note that we have listed some industry related ETFs as well as direct Natural Gas exposure plays excluding any leveraged ETFs.  You can also visit our U.S. Natural Gas ETF (NYSE:UNG) category for more insight.

United States Natural Gas Fund (NYSE:UNG)           

The United States Natural Gas Fund, LP (NYSE:UNG) is a new way for investors and hedgers to manage their exposure to energy. The United States Natural Gas Fund LP (NYSE: UNG) is an exchange traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues units that may be purchased and sold on the NYSE Arca. The investment objective of UNG is for the changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas traded on the New York Mercantile Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire, less UNG’s expenses. 

United States 12 Month Natural Gas (NYSE:UNL)           

The investment seeks to reflect the changes, net of expenses, of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the average of the prices of 12 futures contracts on natural gas traded on the NYMEX. The fund will consist of the near month contact to expire and the contracts for the following eleven months, for a total of 12 consecutive months contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and the contracts for the following eleven consecutive months.           

iPath DJ-UBS Natural Gas TR Sub-Idx ETN (NYSE:GAZ)           

The investment seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note is designed to reflect the performance of natural gas. The index is composed of the Henry Hub Natural Gas futures contract traded on the New York Mercantile Exchange.           

First Trust ISE-Revere Natural Gas Idx (NYSE:FCG)           

The investment seeks to replicate, net of expenses, the ISE-REVERE Natural Gas index. The fund invests at least 90% of assets in common stocks that comprise the index. The index is an equal-weighted index that consists of exchange-listed companies that derive a substantial portion of their revenue from the exploration and production of natural gas. The fund is nondiversified.           

iShares Dow Jones US Oil Equipment Index (NYSE:IEZ)           

The investment seeks results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Oil Equipment & Services index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in the Underlying index but which BGFA believes will help the fund track Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. It is nondiversified.           

Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF (NYSE:WCAT)           

The investment seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters/Jefferies CRB Wildcatters Energy E&P Equity index. The fund normally invests at least 80% of total assets in the equity securities that comprise the underlying index and depositary receipts based on the securities in index. The index is designed to track the overall performance of a universe of listed U.S. and Canadian small and mid-capitalization companies engaged in the exploration and production of oil and natural gas. The fund is nondiversified.

Related posts:

1. U.S. Commodity Funds Files For United States Natural Gas Double Inverse Fund ETF (NYSE:UNGD)
2. Morning Call: Wedge Pattern Close to Resolution
3. The Most Bullish Sign For Gold: Falling Inflation (GLD, GDX, GDXJ, IAU, DZZ, DGP)
4. American Airlines Bankruptcy Doesn’t Mean the Sky is Falling (FAA)
5. How to Play Rising Dollar, Falling Treasury Yields

UNG