I first mentioned NGAS on February 10th, and then on February 25th. Since February 10th, NGAS has appreciated about 23%. The overall chart on a long term as well as short term time frame still has promise. When I first mentioned this stock I made the statement that symmetrical triangle stock chart patterns are not the most reliable chart patterns and can lead to false moves in either the up or down direction.
Nevertheless, the key is to look for confirmation of a new trend. When I first wrote about NGAS, the price was still confined within a large trading range and a symmetrical triangle. As of today, it is still confined within the large trading range, but it has now officially moved upwards out of the symmetrical triangle with a sign of strength.
New trend could be establishing
As you can see from the stock chart, NGAS was able to successfully break north out of a 1 year downtrend line with a sign of strength. Before this sign of strength actually occurred, it was the key missing ingredient in the overall pattern setup. It is what this stock needed to do, to prove itself. What exactly is a sign of strength? It is a long extended price bar that is accompanied by heavier or equal volume relative to all previous price swings at the same price level. That is quite a mouthful, but in essence, it is the market telling us it wants to move, it wants to establish a new trend. It shows us that buyers have the upper hand, and real demand is coming into the market. Stocks or commodities that show signs of strength on either daily, weekly, monthly, or yearly charts are giving big hints as to future price action. The probability is good that after a sign of strength, price action will continue in the same direction. But the sign of strength must be carefully examined along with the volume to confirm that it actually is a valid sign of strength. This is somewhat subjective and also involves volume analysis in comparison to previous price swings as I alluded to earlier.
Onward.
What now?
The daily and monthly chart on NGAS is looking quite good as well. The monthly MACD is starting to look like it wants to do a bullish crossover, another good sign.
On March 16th there is an earnings call. This brings up the relationship between technical analysis and news. I suggest you always follow what supply and demand tells you first and then consider news and other potential triggers. The overall chart pattern both long and short term, and the sign of strength NGAS has already shown are indication to me that the upcoming call will be perceived favorably and the up trend will resume.
The bottom line though despite everything I have already said here is the price of natural gas!
Peace.
I’m out.
tc