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The U.S. Natural Gas Fund (AMEX: UNG) has fallen on hard times and is on the verge of entering a bear market.
Chart Courtesy of StockCharts.com
Boy, oh boy! The fuel of the next decade is in danger of entering a bear market in the current decade, at least as measured by the price action of the U.S. Natural Gas Fund, which had lost 26% of its value since topping out in early July.
What makes the collapse of natural gas prices most interesting is that it's happened during hurricane season, and at a time when the mood of the U.S. population is starting to shift toward alternative fuels, and there is a big push coming out of the Boone Pickens organization for using natural gas as a replacement for gasoline.
So are we looking at a major bear market in natural gas? Or are we looking at a major buying opportunity?
The answer may lie at the 44 price area, which is just below the 200-day moving average. Tricky traders know that technicians are watching the 200 day line and that short sellers might come into the natural gas market as this ETF falls below the key support level, which is near $45.
But $44 is actually better support. A break below $44 on UNG to 40. Below that there is support at $36 and $32.
In other words, a further break in natural gas could lead to an acceleration of what has already been a major decline in the sector.
More important, though, is what the price of natural gas may be forecasting for the price of oil.
Is the top in oil in?
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