Natural Gas Index Fund Holds Support; Is It Time To Buy? (FCG, UNG)

Stoyan Bojinov: This week is riddled with more headwinds for equity markets as looming “fiscal cliff” woes and eurozone debt drama are colliding, prompting speculation that a“Perfect Storm” may already be developing on Wall Street. Profit-taking pressures will likely remain a dominant theme on the domestic equity front as policymakers look to avert the much-feared automatic trigger of tax-hikes; however, despite boasting a safe haven reputation, precious metals continue to drift sideways, offering little to no protection from looming uncertainties in recent trading sessions [for more economic news and analysis subscribe to our free newsletter].

Chart Analysis

Amid the selling pressures in the stock market, the First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA:FCG) appears ripe with opportunity as this ETF has managed to hold its ground at a major support level.

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Since sinking below its 200-day moving average (yellow line) in early November of this year, FCG appears to be building out support just above $15.50 a share. While its recent price action is certainly quite bearish, there is some evidence that points to a more bullish future for this fund; notice how FCG previously managed to hold support above the $15 .50 level (blue line) throughout July and early August of this year. Furthermore, notice how this ETF is holding support backed by above-average trading volumes, perhaps suggesting that buyers are pulling the trigger in anticipation that this support level will hold [see Most Popular Commodity ETFs].

Outlook

If natural gas futures continue to rally, FCG may see additional pressures to bounce higher as it has previously done so; in terms of upside, this ETF will first need to settle above $16 a share before it can tackle resistance at the $17 level right around its 200-day moving average. On the other hand, if support fails to hold at current levels, FCG could see accelerating selling pressures; in terms of downside, this ETF has immediate support at $15.50 a share followed by the $14.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Related Ticker: U.S. Natural Gas ETF (NYSEARCA:UNG).

Written By Stoyan Bojinov From ETF Database Disclosure: No Positions

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