Conclusion, Investment Implications, Strategy

Yesterday’s breakout higher in the NYSE® Arca Natural Gas Index™ (XNG), from 6 months of sideways investor indecision, indicates its larger November 2020 major uptrendhas resumed and targets an additional 23% rise to 720.00. This breakout suggests similar bullish implications for the the United States Natural Gas Fund, LP (UNG).

Analysis and Rationale

Chart 1 below plots the NYSE® Arca Natural Gas Index™ (XNG) daily over the past year along with its 200-day moving average, a widely-watched major trend proxy.  XNG is a rules-based index designed to measure the performance of highly capitalized companies in the natural gas industry involved primarily in natural gas exploration and production and natural gas pipeline transportation and transmission.

The green highlights point out that the index broke out higher yesterday from almost 6 months of sideways investor indecision.  This breakout indicates the larger November 2020 major uptrend, as defined by the 200-day MA, has resumed and targets an additional 23% rise to 720.00. 

Chart 1

This target will remain valid as long as the upper boundary of the indecision area (blue highlights) at 576.00 now loosely contains the index on the downside as underlying support.

Chart 2 below plots the United States Natural Gas Fund, LP (UNG) daily since September 2021 a long with its 200-day MA.  UNG primarily in futures contracts for natural gas that are traded on the NYMEX, ICE Futures Europe and ICE Futures U.S. (together, “ICE Futures”) or other U.S. and foreign exchanges. The Benchmark Futures Contract is the futures contract on natural gas as 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.  

UNG has had a significant and mostly stable positive linear correlation to XNG throughout the past 15 years.

The green highlights show that UNG gapped back above its 200-day moving average this morning on the open, which indicates its June 2021 major uptrend, as defined by the 200-day MA, has resumed following successful June and October tests of major underlying support at 19.50, which represents the Feb 2nd benchmark high.

Chart 2

Considering today’s gap higher, back above the 200-day MA, UNG should now remain above the 21.22 area to keep these bullish implications intact.

Our Updated Sectors & Industry Groups Table

Table 1 below is an updated version of our Sectors & Industry Groups Table, which always appears as Table 2 of our Monday morning Keys To This Week: Market Sectors & Industry Groups reports.

Table 1

It lists UNG at the top as the newest of these ideas and shows an 32.77 upside target, 36% higher than where it’s currently trading.