About a month ago we mentioned the bearish Head & Shoulder pattern in Natural gas Futures. At the time, they were trading around 4.19. Now Natty is at 3.76.
Although the downside move to 3.76 is a good start, the measured move has yet to take place with regard to the H&S pattern. The move measures to 4.40 (yellow rectangle) which puts it in a gap from around this time last year (pink oval).
On the flip side, there is nice support here in Natty. The 3.75 level is an area where buyer tend to step in, which could prevent the full H&S measured move from taking place.
At the moment, we are not holding any positions in Natural Gas Futures or UNG. If this support level holds a little longer, we will put on a 9/10 Bull Call Spread. If support break, we may just short some Futures.