After hitting the first price target for a quick, 1-day gain of *4.1%, the UGAZ (3x long natural gas ETN) made a few more tests of that resistance level, followed by the usual reaction while pulling back to clip the suggested stop of 16.65 briefly yesterday before snapping back to close just above that level for a *5.5% loss for those that did not book partial or full profits at T1. (*net gain/loss figures would be about 1/3rd of that accounting for the suggested beta-adjusted position size of 0.35).
UGAZ 60-min June 19th
This trade highlights the difficulty of trying to align price targets & stop levels on trade ideas for ETNs that track futures contracts, my preferred trading proxies, as well as the effects of the price decay suffered by leveraged ETFs & ETNs during periods of back & forth price swings. (a detailed explanation of price decay from leveraged ETFs can be found on the FAQ page under the ETF Related Questions subsection). As many retail traders don’t have the access to a futures account, the official trades on the site will always be individual stocks or ETFs/ETNs.
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- NG 60-min June 18th
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- NG 60-min June 19th
The first 60-minute chart of /NG (natural gas futures) above was posted along with a request for an update on UGAZ here in the trading room yesterday. As the 2nd, updated chart shows, not only has /NG so far successfully tested & reversed off those two intersection support lines, but it also remains comfortable above the recent lows from earlier this month. It was those reaction lows in which the suggested stop for the UGAZ trade was set slightly below as reaction lows are natural support levels. Finally, note the large bullish divergences on the /NG daily chart below which are similar, but even larger than those preceding the 142% rally back in 2016.
$NATGAS daily June 19th
While nat gas futures, which again is what UGAZ is tracking/holding, has yet to take out those previous lows, UGAZ did primary because nat gas prices, although moving higher since the breakout above the bullish falling wedge pattern, have been doing so in a mostly sideways-to-slightly higher, choppy trading range vs. a more unidirectional rally, which would have resulted in little to no price decay & may have actually resulted in the 3x leverage working for, not against the trade (again, see the FAQ page for that explanation).
Although I still like this trade & remain long /NG personally, as the suggested stop on the official proxy (UGAZ) was hit, this trade & all associated posts will now be moved to the Completed Trades archives for future reference. I will also be glad to provide updates on /NG or UGAZ for anyone still in the trade or interested in taking a position.