After breaking down below support of the prior swing low and dipping below the 200-day MA for a few days, United States Natural Gas ETF ($UNG) rallied off the lows and closed above the 200-day MA yesterday.



$UNG may be forming a bullish double bottom pattern if it can hold the 200-day MA and push higher next week. If so, the first higher swing low that holds at or above $21 could provide us with a low risk entry point for partial size.

For those of you wondering how we can label $UNG as a double bottom if the lows are not equal please see the chart below:

Double Bottom Chart Patterns


While most traders who have read books on technical analysis know of the conventional double bottom, where both lows are about equal, the double bottom we prefer to trade is one where the stock/ETF undercuts the prior swing low and reverses higher. This undercut of the prior swing low usually scares away most longs and triggers a ton of sell stops.

Now, the key to this pattern is the price action recovering quickly above the prior swing low (in $UNG that level is $21). If $UNG sits below $21 for too long (more than a few weeks), then it is no longer a shakeout....it then becomes an ETF making lower highs and lower lows (a downtrend).

Guggenheim Solar ETF ($TAN) remains on our watchlist going into today, but we are monitoring the action for a potential pullback entry if it can hold support at the 20-day EMA around $24.



Ideally, we'd like to see $TAN dip below the 20-day EMA for a few hours and close back above to form a bullish reversal candle. But if we are unable to locate this low-risk pullback entry over the next day or two, that is fine, as we still have buy stop order that should trigger on a break of the downtrend line (subscribing members should note our exact trigger price for buy entry in today's report).

The Fed will release its decision on rates this afternoon, so as usual, we can expect a pick up in volatility in the final 90 minutes of trading. For those who trade the plan and come in prepared, Fed days are not such a big deal. However, for some traders, the last 90 minutes of trading on a Fed day can turn in to a roller coaster ride. Emotional based decision making hardly ever works, so we always recommend planning the trade in advance and sticking to that plan during the day.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.