The United States Natural Gas Fund (NYSEArca: UNG) is easy to spot on ETF heatmap on Wednesday. UNG is one of the few slivers of green in a sea of red.
The high-flying fund, which tracks natural gas futures, is up almost 10% in late trading on volume that s nearly five times the daily average. President Obama’s State of the Union address Tuesday night is one catalyst lifting UNG.
“The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we’ve been in decades. One of the reasons why is natural gas, if extracted safely, it’s the bridge fuel that can power our economy with less of the carbon pollution that causes climate change,” said Obama.
Frigid temperatures across the Northeast are again bolstering gas prices, acting as another catalyst for UNG. The Southeast is also uncommonly cold, as highlighted by The Weather Channel.
Now up more than 22% in the past month, UNG could be poised for even more upside.
“On the weekly chart, UNG cleared the prior highs of 2013 on big volume. The weekly price and volume action was impressive, and could potentially spark a strong rally after nearly two years of chop near the lows,” said Deron Wagner of Morpheus Trading Group.
“As the price action settles down and digests the last wave up, the 10-day moving average should eventually catch up and provide support. A pullback to the 10-day MA might be all we get if the new uptrend is strong. Note that the 50-day MA has crossed above the 200-day MA, and has been trending higher for a few months. The 200-day moving average is still sideways, but did turn up slightly last week,” added Wagner.
Natural gas is the best performing commodity in the S&P GSCI Commodity Index this year. It is also in backwardation, the scenario where futures contracts trade at higher prices as expiration approaches compared to where the contract resided when expiration was further off.
“Natural gas has been in backwardation in only 13% of months since 1994. Also, it has only been in backwardation in 10 months within the past 10 years with an average premium of 39 basis points. That is about 60 basis points less than the premium thus far in January 2014. What is less unusual about the backwardation is its January appearance since backwardation has always happened in extreme cold or heat,” said Vice president at S&P Dow Jones Indices Jodie Gunzberg. [Nat Gas is Backwardated]
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.