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Growfast
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Stock, Options, ETF and Commodities Investor; My educational background is in Computer Science and Accounting with significant entrepreneurial and Fortune 100 Corporate experience in Information Management and Technology services in industries including: Consulting, Oil and Gas, Manufacturing,... More
  • DGAZ - Looking For The Trading Ranges To Adjust Positions 25 comments
    Feb 10, 2014 7:10 PM | about stocks: DGAZ

    For those of you who have been in DGAZ and have been following my articles, the past few days has been very rewarding after working through the Natural Gas spikes. We have now made the bullish turn in DGAZ and now want to look for what we expect next and how I plan to trade the ranges, as I see them.

    First, lets look at an update on the Natural Gas spot chart:

    (click to enlarge)

    From the chart, we see some of the following:

    - We appear to have broken through resistance to below the spiking pattern we saw end of January and early this month.

    - Notice that MACD crossed over, confirming a bearish turn

    - Current price is around 4.6, with upper resistance at 4.8 and support at 4.4.

    I suspect that we will trade in this 4.4 to 4.8 trading range for up to a few weeks, then most likely, break below the support at 4.4 to then enter a trading range of 4.0 to 4.4. If there is another severe winter storm or some other fundamental change that causes us to break above 4.8, then we may look for the potential to go back to test the 5.4 level. But, at this time, I don't think this is highly probable. So, we will want to take advantage of the opportunity to trade this 4.4 to 4.8 range, and prepare for eventually working in the 4.0 to 4.4 range.

    Now lets look at the updated DGAZ chart:

    (click to enlarge)

    (click to enlarge)

    From the DGAZ chart, closing at around 4.60 today, we appear to be nearing resistance at 5. While in this current area 4.6 to 5.0 in DGAZ, we should expect some resistance and a pullback, but my expectation is this pullback will not take us lower than perhaps 4.1 to 4.25 as long as Natural Gas continues to hold its 4.4 to 4.8 range. The chart confirms that we have made and confirmed the bullish turn with high volume and the MACD crossover. In this near-term bullish trend, we may pull back but I think we should see DGAZ break through the 5.0 level, then find a trading range between 5.0 and about 7.0 where we will find some resistance at the moving average.

    I plan to take the opportunities given in the trading ranges to reposition - adjust cost basis and take some profits along the way, selling some shares as we work to support levels and buying back lower cost when we hit the resistance levels. I may also trade options in BOIL and/or KOLD around these trading ranges as well.

    Disclosure: I am long DGAZ.

    Additional disclosure: I may trade and reposition DGAZ shares based on dynamics associated with the Natural Gas Market. I may also trade in and out of UGAZ, or buy/sell calls and puts on BOIL or KOLD (2X Leveraged ETFs on Natural Gas Index).The thoughts and opinions in this article, along with all stock talk posts made by the Author, are my own and are shared on the basis of helping others learn, to provoke other points of view that help us all on our journey to become better investors. My posts are never intended to provide investment advice. Investors should always view multiple sources of information in their due diligence process.

    Stocks: DGAZ
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Comments (25)
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  • shopvac20
    , contributor
    Comments (14) | Send Message
     
    Grow, appreciate the article… I am looking for a little bump to the 4.8 - 5 range, then will reposition, unsure if I wanna scalp from UGAZ, maybe under the right conditions. This is the first I have seen of BOIL and KOLD .. I will have to look into those. thanks !
    10 Feb 2014, 07:37 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » Agree on the UGAZ, Shop. Since the view is an overall downtrend in Natural Gas, one would not want to be holding UGAZ when we break into new lower trading ranges. Best to use UGAZ or bull side positions with a very short-term view and ready to pull the trigger if it starts to move against you.

     

    Taking profits, then repositioning in DGAZ at lower cost may be the lowest risk approach.
    10 Feb 2014, 08:06 PM Reply Like
  • markrpat
    , contributor
    Comments (230) | Send Message
     
    Thanks for the article. Lot's of "if's ands, or buts." In other words you have no idea what's going on with nat gas. Sorry, but there is no direction. Maybe this...maybe that. We're all in the same disposition.
    10 Feb 2014, 07:38 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » markrpat - I would say the direction to me is more clear than you suggest - ifs/buts could interrupt and then I would adjust positions and approach accordingly. The ifs/buts certainly have to be watched as the Natural Gas space is very dynamic and we have to be agile when the situation warrants.
    10 Feb 2014, 08:02 PM Reply Like
  • markrpat
    , contributor
    Comments (230) | Send Message
     
    We have the same understanding...and agility is key. Thanks for your article and articulate response.
    10 Feb 2014, 08:16 PM Reply Like
  • Cohen
    , contributor
    Comments (2) | Send Message
     
    I'm long $DGAZ but I went all in at 6.50 so hopefully we see it going above 6.50 lol btw I'm a young novice trader
    10 Feb 2014, 10:47 PM Reply Like
  • rxraider
    , contributor
    Comments (35) | Send Message
     
    Cohen, 'young novice traders' should be very careful trading leveraged ETF's. They can be difficult to manage, even for those of us that are more seasoned veteran traders. Learn how to research, plan, and execute smaller trades first. If I were in your position, I would not commit too much of your funds until you have gained some experience. JMHO.
    11 Feb 2014, 01:14 AM Reply Like
  • Cohen
    , contributor
    Comments (2) | Send Message
     
    That seems like the best thing to do, now I'm just going to hold the stock until I break even. Thanks again for the advice will be taking it and using it!
    11 Feb 2014, 06:07 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » Cohen, I think sometime tomorrow could offer an opportunity to get some at a low price that would lower your cost basis and breakeven point. But, only play with what you will be comfortable doing.
    11 Feb 2014, 06:27 PM Reply Like
  • glaserdx
    , contributor
    Comments (250) | Send Message
     
    Grow-
    DGAZ is trading around $3.80 after hours Tuesday night. Think this is the low for now? Any sense of a near-term price range?
    11 Feb 2014, 07:15 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » If this is not the low, I think we are getting close. The pattern has been the past few weeks that the bulls run up the price going into the Storage report, released Thursday 10:30 ET and then it sells off. Now that we have hit the 5 level though, it could be that bulls are afraid to step up and move it forward.

     

    My anticipation is that tomorrow and maybe even Wed morning may give us opportunity to get some DGAZ in at a little lower level, although I've been nibbling around these areas here.
    11 Feb 2014, 07:22 PM Reply Like
  • glaserdx
    , contributor
    Comments (250) | Send Message
     
    OK, thank you. I will not trade tonight and wait to see what tomorrow brings. Already down 5 cents since my earlier post!
    11 Feb 2014, 07:55 PM Reply Like
  • rxraider
    , contributor
    Comments (35) | Send Message
     
    Wednesday will tell us a lot about NG sentiment. We'll see how far it gets above 5, and how much conviction the bulls have. I sold half of my DGAZ at $4.30 today (should have sold the whole position). Will add to position on weakness.
    11 Feb 2014, 10:49 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » Good that you are working the re-positioning. It is always easy to know what we should have done in hindsight, so you can only work from what you know now. Lets see what tomorrow brings.

     

    Are you concerned you won't see 5.00 DGAZ again? Or, you just concerned you missed opportunity to reposition your entire position? If it is the latter, what if you thought NG was going to go up, you sold your entire position and NG went to 4/DGAZ to 6 and you missed it completely?

     

    Making these calls during the volatile spikes is just difficult to do. Thinking through where you believe the dust will settle, helps to work through the storm with a level head, managing the opportunity for profit and balancing the need to manage risk throughout. We will see what tomorrow holds Raider. Hang in there...
    11 Feb 2014, 11:43 PM Reply Like
  • rxraider
    , contributor
    Comments (35) | Send Message
     
    Good point, Grow. I'm being more aggressive with re-positioning than I have been previously. Bought back the shares I sold yesterday. Sold at $4.30 yesterday, bought back today at $3.97 today. Have a buy order at $3.90 to add more... Looks like nat gas hit 5ish and backed off. After the arctic weather passes through the east coast and if inventories tomorrow don't show a huge draw down, nat gas may have a hard time getting back up to 5 for a while. Your thoughts??
    12 Feb 2014, 10:11 AM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » Agreed, Raider. From here, we should continue to see higher lows and higher highs in DGAZ. There will be opportunities to re-position, but the bull moves up may become smaller without the big spikes. That will likely be welcome to DGAZ holders who bought in early at higher prices that we have seen in a couple weeks. I'm thinking we are headed their way. Chart on DGAZ looks good.
    12 Feb 2014, 10:15 AM Reply Like
  • markrpat
    , contributor
    Comments (230) | Send Message
     
    MAR '14 @ 5.20. Agility is indeed the key.
    13 Feb 2014, 08:56 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » Tonight, that price has risen further but is falling at present and almost back to 5.2. Lets see what that price is by the end of next week. The bulls tried to make a run on 5.4, but not sure they are going to be able to pull that out before the obvious strikes (demand falling rapidly going into spring).

     

    Notice how DGAZ has held relatively strong through this. DGAZ holders seem to know what is going on. And, look at UGAZ; it has gone up, but not by much.
    13 Feb 2014, 11:12 PM Reply Like
  • markrpat
    , contributor
    Comments (230) | Send Message
     
    playing it through $UNG puts here, but I get it.
    13 Feb 2014, 11:28 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » I did see some others post on forums today that they were buying UNG puts and they were very inexpensive. Sounds like a good play, so, look forward to hearing about how the next month or two goes for you.
    13 Feb 2014, 11:30 PM Reply Like
  • markrpat
    , contributor
    Comments (230) | Send Message
     
    Growfast...no one mentioned a month or two. Seems like you're eager to push velocity products...okay with me.
    14 Feb 2014, 12:09 AM Reply Like
  • Martinlovesfood
    , contributor
    Comments (2) | Send Message
     
    You are aware ugaz and dgaz have rolled to April? So hence the small decline in dgaz, and small up for ugaz,,
    15 Feb 2014, 12:52 PM Reply Like
  • Growfast
    , contributor
    Comments (278) | Send Message
     
    Author’s reply » markrpat - you seem to suggest that I may have some link or bias to Velocity products. I have no relationship with Velocity or any other product. Out of the ETF families, I do happen to like the 3x leverage offerings, but that is my own preference as, when these move, they really move. If Velocity or any other product is not for you, no problems here.
    14 Feb 2014, 09:19 AM Reply Like
  • Martinlovesfood
    , contributor
    Comments (2) | Send Message
     
    u are aware that ugaz and dgaz are trading in April now, Not March.so the hold up with dgaz and the small rise in ugaz is due to the roll.
    15 Feb 2014, 12:53 PM Reply Like
  • sderenthal
    , contributor
    Comment (1) | Send Message
     
    Where did you find out that ugaz and dgaz were trading in April now? Where can I look to see that information?
    16 Feb 2014, 11:02 AM Reply Like
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