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Why did UNG retreat from an important support level?



Natural gas prices rebound 

Natural gas futures for the April futures contracts showed a possible downward channel. Prices recovered marginally on February 27, 2015. The expectation of an extended cold climate across the US supported natural gas prices. Natural gas futures recovered from the important support level of $2.69 per MMBtu (British thermal units in millions).

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Pivot points

Bearish traders should watch out for an important support level at $2.69 per MMBtu. Natural gas prices hit this mark multiple times in January and February 2015. On the up side, bullish speculators could see important resistance at $2.900 MMBtu. This resistance is established from the peaks of January 12, 26, 28, and 29.

The natural gas price chart shows that prices recovered from the key support level, as stated earlier. If the trend continues, prices could hit $2.800 per MMBtu—according to the channel. It’s supported by the cold weather conditions. The weather conditions are fueling the sentiments of the short-term demand for gas. However, the RSI (relative strength index) and MACD (moving average convergence divergence) give mixed price direction signals. Traders betting long on natural gas should remember that natural gas’ long-term trend is still downward. It’s led by a gas surplus.

The increase in natural gas prices was reflected in the United States Natural Gas Fund (UNG). UNG also increased and settled at $13.74—up by 0.73% on February 27, 2014. As a result, UNG recovered from a key support level of $13.50. The trend in natural gas suggests that UNG could hit $14.50 levels. UNG consists of natural gas futures contracts traded on the New York Mercantile Exchange.

The increase in natural gas prices impacts gas producers’ margins—like Conoco Phillips (COP), EOG Resources (EOG), and Occidental Petroleum (OXY). EOG, COP, and OXY make up 3.9%, 3.8%, and 3.6% of the Energy Select Sector SPDR ETF (XLE), respectively.


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