United States Natural Gas (UNG)
Update (11/1/07)

I wanted to update where we are with UNG, which made an important breakout this week in its efforts to recover from the NG mini-bear market.  While market sentiment for crude has been excessively bullish, NG sentiment is moderate and rising, per the latest Commitments of Traders info, which we consider a positive.  We look at the updated wave options below.

Most ideally, UNG would be launching an Intermediate Wave A rally, that would carry back to the 54.68 area.  This should subdivide as an impulse wave, of which Waves 1 and 2 would have completed.  These are the labels in red.  The blue ALT labels imply a smaller ABC type recovery, which should still see the ETF rally, but with less ambitious upside.  In this scenario, the 47-48 area would be targeted.  The EFT should remain above 40.22 if either outlook is correct.  43.95 is preliminary resistance.

For an option play, we like the January 2008 $43 Call (UNGAQ), which was selling for $4.00 with the Delta at 0.59.  

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