"Reading the tape"

Here are some things I look for when putting on a trade. These are not trade recommendations but are intended to illustrate how to recognize strong momentum in price movement. In my mind it is not the price I pay for something but the direction the price is going when I take a position. It is not about price it is about direction and timing.

In the Natural gas market there are probably many traders who are short. I don't mean they are of small stature. I mean they have sold the NG market short. They have sold shares or futures contracts of the commodity they don't own in order to profit from a fall in the price of the market when they buy those shares back and return them to the party they borrowed the shares from. In a market that has been in a long decline it is not unusual for many traders to have hopped on the bandwagon and sold short. If the price starts to rise they often get in a hurry to buy those shares back that they sold short. This has the effect of pushing prices up faster and a snowball effect can occur, the result being a very sharp rally. This is one reason it is so difficult to make money by shorting a market. The sharp rallies. If a market goes in a sideways pattern for awhile after one of these long declines a line in the sand gets drawn and traders decide they will get out if the market goes above the line.  I think I see the line in UNG:



And a 15 min. chart showing the "ceiling" at $18.50

It is probable that there will be a sharp move up if the price crosses above the line.

And by looking at the daily chart it would probably go to about $20 rather quickly.

But it might not. Probabilities. Not guarantees......

gh



This is the long downtrend with the small pattern at the bottom. It is still a downtrend.

If I was a NG short I wouldn't sleep very well this weekend!!