Natural Gas ETF is in a Precarious Spot

The United States Natural Gas Fund (NYSEArca: UNG), the most widely followed natural gas exchange traded product, was hot until was not. Natural gas surged in the early stages of the fourth quarter amid expectations for cold winter temperatures in the U.S. Northeast, but that trade has unraveled this month.

Entering Tuesday, UNG sported a month-to-date loss of almost 27%. NatGasWeather said weather data over the weekend revealed an ongoing bearish pattern through December 28 to 29 with the Global Forecast System falling 23 billion cubic feet of expected demand compared to Friday, the Natural Gas Intelligence reports.

In November, UNG gained nearly 40%, good for its biggest monthly gain in a decade. Additionally, the fund saw its largest intraday gains over the past two years last month.

“But the commodity’s rapid run higher seems to have reversed almost as quickly as it occurred. After a few weeks spent appearing to test its footing around a 10% correction from its mid-November high of $39.87, UNG gapped lower twice last week — once on Wednesday, to the $33 level, and again on Friday, down to $31,” reports Schaeffer’s Investment Research.

Options Activity

UNG currently resides just under $30, which is near the important $31 area some options traders are monitoring.