Revisiting The Biggest ETF Loser

Several readers have emailed me and were wondering if there was some credence to articles suggesting Natural Gas (UNG) as an investment was ready to explode.

Maybe there are new fundamental reasons, but I have heard most arguments every so often over the past few years as UNG plummeted further into abyss.

The following 5-year chart clearly depicts the misery those investors, who followed past buy recommendations, have gone through as this ETF gave a new meaning to the word gravity:

Here are some of the current momentum figures:

4-wk: -1.83%
8-wk: -3.13%
12-wk: +3.88%
YTD: -1.67%
%M/A: -11.87% (% below its long term trend line)

The natural tendency for investors is to want to pick the absolute bottom and ride the trend back up. The 3-months chart shows that indeed UNG has popped off its December bottom a few times:

However, so far all breakout attempts have been head fakes. Until UNG actually pierces and breaks clearly above its long-term trend line, defined as %/M/A in the weekly StatSheet, the downside risk is simply too high.

It’s better to be patient and wait for an actual breakout, which increases your odds that a true trend reversal has in fact taken place. Going bottom fishing right now is simply wishful thinking and may satisfy your gambling instinct, but may turn into a disappointing experience.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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