I last wrote about this on 28 October 2013 (see earlier post). The chart, below, shows the last 6 months of UNG which aims to track the price of US Natural Gas.
You can see how it has shot up since early November. Indeed, on Friday, it soared nearly 8%.
I have been musing that a decision should be made at around $25, if we got there (which was likely). The below chart suggests that the black lines show a price channel since early 2012. As you can see, the price has risen to the top line and fallen back from it 4 times. Similarly, the price has fallen to the bottom and bounced 4 times.
Note that the channel is gently rising which is positive.
So, after the rally these last 2 months and, in particular the large rise on Friday, the price is very close to the top of the channel.
If the price rises above the top line and appears to be sustainable, the sky’s the limit.
On the other hand, the upper line may be the top (or A top) and it may head back down to the lower line at $17-18 as it has done several times. It could even fall through but this is not likely.
I remind you the price was $515 in 2008 and is, even now, not even $25 – after a 60% rise since May 2012. We remain intrigued as to whether or not UNG will rise strongly for years. It can do and probably it will do, given the encouraging indicators. But, as ever, on verra.
If it rises to $30 that would be a 100% rise from the bottom yet the price would still be over 90% down on the 2008 high point.
I should add there is another potential scenario: The price could rise above the upper line and immediately fall back under – which would of course not be a positive sign for the direction of the price.
I reiterate our view that this has the potential to become an enormously profitable investment over time. It needs to prove the potential.
Those seeking to learn more might find the following economics/investing article/blogpost and Engineering & Technology Magazine debate useful.
For the investment:
For and Against fracking:
Nothing in this blog may be deemed as advice. The author of this blog and/or his company will not be liable for losses under any circumstances as a result of taking or not taking action due to anything written in this blog.
Copyright Jonathan Davis 2014
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