See previous blogs! In the most bearish scenario  this ETF should get to $14+. We will comment at some other time regarding the long term potential, for the moment it may just be a nice profit in a very short time, why not take it’??

We recommended this leveraged ETF on natural gas on April 18th when it was trading at about $8.50. This is about the most trend-persistent commodity for a very long time. What that means is basically that analysts, brokers and other connoisseurs who have absolutely no idea what they are talking about parrot each other and keep repeating the same mantra. When it was around $6 on the commodity this just had to be bought and there was only one single analyst (at Dain Rauscher) that I am aware of who wrote a very good report arguing that natural gas would  go to about $4 and stay there for a long time. Going long the stuff too early has been extremely costly particularly for those that trade commodities without stops.

In any event sentiment has turned in a truly remarkable way and now we have the likes of Goldman Sachs and T. Boone Pickens firmly on the long side. It is all a bit too much. Here is the chart;

We do not care about the fundamentals. Natural gas is often a by product of oil and consequently it does not have its own demand and supply curves. Next it can not (yet) be moved around so it has a “regional” price. We look only at the EW patterns. Assuming this last leg down on HNU is a 5th wave, typically we should retrace back to about $14 as a minimum. Beyond that $23. In both cases at least a minimum of 3 waves up is required. Presently we are up about 29% and this ETF goes at twice the speed of the gas itself.

A week ago I mentioned , tongue in cheek, how this ETF had played havoc with a lot of portfolios, many held by PROs, that is brokers themselves. At RBC they are so careful that a year and a half ago they changed the rules and now brokers must be options licensed in order to be able to peddle this stuff. The ETF, that day, traded and closed at around $4.80 and the last trade today (at this time) is at $5,41 The catalyst is the somewhat unbelievable contention that Japan will have to import more of this stuff to generate power (gas turbine generators can be built in a few years, reactors take 15/20 years). Makes you wonder why GE was slammed at the same time, given that it is one of the few companies that can build these plants. Anyway, when the news is at its worst (as in the Star article) things often turn on a dime, regardless of the excuse.