Is BOIL Ready To Bubble?

Natural Gas has been in a serious bear market. But the tides may be turning as we head into a seasonally strong part of the year for the commodity. Looking at the chart and the most recent price action, let’s see if we can make a bullish case for BOIL.
For beginners BOIL is down over 75% year-to-date and over 95% year-over-year; ouch! BOIL is a leveraged ETF, which provides 2X the daily return of an index that measures the price performance of natural gas. So as natural gas has been in a steep downtrend, BOIL has been in pretty much a freefall.
Over the past week, BOIL jumped over 31% as rumors in Europe gave fodder to a price spike. More importantly, after making several bullish divergences in the Relative Strength Index, BOIL broke above its down trendline while simultaneously making a yearly high in its RSI. Those are two strong technical signals worth paying attention to.
Where a market closes relative to its timeframe being measured is also a way to identify the strength of a market. If an instrument closes at the high of the day, week, or month, that’s a bullish sign. BOIL closed within a few pennies of its weekly high, a third bullish case for natural gas.
Going forward, we’re going to be watching a few things to see if this rally can be sustained. First, we’d like to see BOIL continue to close above its 8-day exponential moving average on a daily basis; intraday penetrations are not considered. A moving average is a consensus of value, an 8-day being a very small window. In order for BOIL to reverse its intermediate and long-term downtrend, daily closes above this ema need to be continued.
Second, the gap between $3.41 and $3.67 needs to be filled, as the popular assumption is that gaps act as resistance in downtrends. For an uptrend to be in play, this gap would obviously need to be filled completely. With a complete fill, this area of price action would hypothetically provide support during future bull-run corrections.
Third, a complete break above $4.00 would be required to be legitimately bullish. Downtrends consist of lower lows and lower highs. For BOIL to break that pattern, price action HAS to get above the prior bear market high. Otherwise, all bets are off, and we are just seeing a bear market rally in an otherwise dreadful market.

1 comment

Mack Tuggle

The 8 day ema needs to hold. A close above 2.91 today would be healthy. Stock split this week so be in the know if you hold a position.

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