The largest natural gas ETF has pulled back the past couple sessions following a strong two-week rally. However, there is a bullish pattern of volume in the weekly chart of U.S. Natural Gas Fund (NYSEArca: UNG).
Volume is a leading indicator and often precedes price action.
Notice on the chart below how volume was declining as UNG made its low April 2012, and then increased significantly on the ensuing rally off that low.
Again volume decreased as UNG sold off but the price was unable to make a new low. This is a warning sign or red flag for the bears that the trend may be ending. Volume has since increased significantly as UNG rallied back to the most recent high on the weekly chart. [Natural Gas Rally Pauses]
This is a textbook pattern of “Accumulation” and shows that the shares are now going from “weak hands” to “strong hands.” Demand is gradually overtaking supply. I believe there is very good potential for a reversal in the long term trend once there is confirmation of this pattern.