Natural gas has during its last intermediate cycle broken out of its down-trend zone. This cycle has now lasted for 57 days. Based on the first intermediate cycle top/bottom it hit the 2.618 FIB ratio on Friday.
RSI is in the overbought zone showing divergence with price.
Momentum is approaching "the red zone" typical close to the cycle tops. I expect either a sharp drop on Monday or a re-test of the Friday level before the drop. I expect the first drop to at least go down and test the trend-channel wall at the 78.6 FIB level.
The price is stretched far above the 200 MA.
RSI is in the overbought zone showing divergence with price.
Momentum is approaching "the red zone" typical close to the cycle tops. I expect either a sharp drop on Monday or a re-test of the Friday level before the drop. I expect the first drop to at least go down and test the trend-channel wall at the 78.6 FIB level.
The price is stretched far above the 200 MA.
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Due to that his has been a recent break-out from significant levels, a higher level might be tested before the turnaround. Therefore, watch price-action carefully in the coming days before entering position. It might go up a bit more due to this breakout. A double top signs reversal.
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It hit an important resistance zone, adding first tranche of DGAZ.
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Looks like price struggles to manage a higher high of today, it have tried 3 times. So far so good.
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Point of entry for second tranche:
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The idea with adding tranches; just like trying to time a bottom, it is sometimes difficult to time a top. But the higher a price goes, the less probability is that it will keep increasing as price over time has a tendency to regress towards the mean.
I start normally with a small position (20-25 % of total planned amount), then add at each higher resistance zone depending how significant the resistance zone is. The next resistance zone is very significant given the cycle structure of our current run. There I will add a bigger position (40 %). I placed 25 % of the position at the blue resistance top line. If it reaches the above zone, I will be 65 % invested in the position.
No question that there is a lot of upside potential in NatGas over time, but its current cycle is very mature and price stretched and overbought. It has only been more overbought 5 times the last 4 years.
I start normally with a small position (20-25 % of total planned amount), then add at each higher resistance zone depending how significant the resistance zone is. The next resistance zone is very significant given the cycle structure of our current run. There I will add a bigger position (40 %). I placed 25 % of the position at the blue resistance top line. If it reaches the above zone, I will be 65 % invested in the position.
No question that there is a lot of upside potential in NatGas over time, but its current cycle is very mature and price stretched and overbought. It has only been more overbought 5 times the last 4 years.
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Watching price action at this point.
Watching price action at this point.
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It touched and retraced. Do not add more positions just yet. Wait for either the next top or that it crosses that line.
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Adding 25 % to the short position. It broke the resistance line on the 2nd try
