Natural gas exchange traded funds have enjoyed some days in the sun this year, ranking among the best ETFs earlier in 2014.

However, signs are mounting that the sun may be setting on the long natural gas trade. With Wednesday’s loss, the United States Natural Gas Fund (NYSEArca: UNG) has tumbled about 11% over the past month and some technical analysts believe UNG’s charts are weakening.

Earlier this week, UNG broke critical support at $24, according to Deron Wagner of Morpheus Trading Group.

“Earlier this week, we stopped out of our position in UNG as it broke a pivotal support level just under $24. However, we will continue to monitor the action on the weekly chart to see if $UNG can quickly recover off the lows and reclaim the $24 level. Such a move could potentially take place next week, if it can form a bullish reversal candle this week,” notes Wagner.

At the fundamental level, weather, which was the catalyst to drive UNG and natural gas futures higher earlier this year, has turned against the ETF. Futures slid to a six-month low Wednesday following forecasts predicting cooler weather. That cooler weather will limit summertime demand after some traders bet higher temperatures would stoke natural gas demand. [Nat Gas ETF’s Summer Fortunes]

While UNG has wilted, the ProShares UltraShort Bloomberg Natural Gas (NYSEArca: KOLD) has surged, gaining almost 20% over the past month. KOLD attempts to deliver twice the daily inverse performance of the Bloomberg Natural Gas Subindex. [ProShares Commodities ETFs Change Indices]

Even with the near-term weakness, traders may want to keep an eye on UNG and related natural gas ETFs as the fourth quarter approaches.

“Record production will bring stockpiles to 3.43 trillion cubic feet by the end of October, which would be the least for that time of year since 2008, the EIA said yesterday in its monthly Short-Term Energy Outlook. Marketed gas output may climb 4.1 percent to a record 73.08 billion cubic feet a day,” reports Christine Buurma for Bloomberg.

United States Natural Gas Fund

ETF Trends editorial team contributed to this piece.

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.

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