Is Natural Gas Fund Ready to Pop?

NEW YORK (TheGoldAndOilGuy.com) -- The United States Natural Gas Fund(UNG) recently caught my attention. While it was in a significant downtrend for the better part of a year, it has recently been consolidating right under the $20 level.

A look at the daily chart shows a long move down and then, recently, a sideways consolidation pattern. While this is typically a continuation pattern, I am beginning to think that the next move may be up, rather than an extension of the previous downtrend.

Over the last two weeks, there has been significant support above $18 and significant volume.

The $20 to $20.50 level has been tested multiple times and the more tests it undertakes, the more likely it is to break.

Both the 20-day and 50-day moving averages have turned upward and UNG is trading above both.

If we zoom in a bit and take a look at the hourly chart, we are presented with two scenarios

1. The rising wedge holds and UNG breaks through the $20 to $20.50 resistance level on high volume and a new long-term up trend is produced.
2. The head and shoulders pattern within the wedge breaks downward and the downtrend resumes.

I'm leaning towards option one but will be waiting for a breakout confirmed with volume in either case.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.