This week is riddled with more headwinds for equity markets as looming “fiscal cliff” woes and eurozone debt drama are colliding, prompting speculation that a “Perfect Storm” may already be developing on Wall Street. Profit-taking pressures will likely remain a dominant theme on the domestic equity front as policymakers look to avert the much-feared automatic trigger of tax-hikes; however, despite boasting a safe haven reputation, precious metals continue to drift sideways, offering little to no protection from looming uncertainties in recent trading sessions [for more economic news and analysis subscribe to our free newsletter].
Chart Analysis
Amid the selling pressures in the stock market, the First Trust ISE-Revere Natural Gas Index Fund (FCG) appears ripe with opportunity as this ETF has managed to hold its ground at a major support level.
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Since sinking below its 200-day moving average (yellow line) in early November of this year, FCG appears to be building out support just above $15.50 a share. While its recent price action is certainly quite bearish, there is some evidence that points to a more bullish future for this fund; notice how FCG previously managed to hold support above the $15 .50 level (blue line) throughout July and early August of this year. Furthermore, notice how this ETF is holding support backed by above-average trading volumes, perhaps suggesting that buyers are pulling the trigger in anticipation that this support level will hold [see Most Popular Commodity ETFs].
Outlook
If natural gas futures continue to rally, FCG may see additional pressures to bounce higher as it has previously done so; in terms of upside, this ETF will first need to settle above $16 a share before it can tackle resistance at the $17 level right around its 200-day moving average. On the other hand, if support fails to hold at current levels, FCG could see accelerating selling pressures; in terms of downside, this ETF has immediate support at $15.50 a share followed by the $14.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.
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