United States Natural Gas Fund (UNG) saw its highest volume of all time on Wednesday by a long shot, states JC Parets of AllStarCharts.com.

I mean, it wasn't even close. When I see something like that, I think "Capitulation". There's something going on here and I want to take a closer look. So there's that look. You can see the UNG Natural Gas ETF back down to those 2020 levels. This ETF rallied over 300% last time it was down here:


So I have a few thoughts on this that I'd like to share. First about catching falling knives and then about this trade itself. So here it goes:

A Technical Analyst and a Fundamental Analyst are chatting about the markets in the kitchen. Accidentally one of them knocks a kitchen knife off the table landing right in the fundamental analyst’s foot! The fundamental analyst yells at the technician, asking him why he didn’t catch the knife. “You know Technicians don’t catch falling knives!”, the technician responded.

He in turn asks the fundamental analyst why he didn’t move his foot out of the way. The Fundamental analyst responds, “ I didn’t think it could go that low”. The moral of the story here is, don't make it a habit of catching falling knives and fighting trends. If you must, then you better have an excellent reason.

If you must act on that reason, you better have very well-defined risk management procedures in place or you'll be in a lot of trouble. Ok, that's my spiel on fighting trends and how (not) to do it. As far as the Natty Gas goes, we could see an epic bounce. But again, "could" see one.

This is not support. This is only "potential" support. Also, is UNG the best way to play a bounce in Natural Gas? Definitely not. There are futures markets, there are options, and there are leveraged ETFs that each have their own advantages and disadvantages. So I would encourage anyone who is participating here to consider which of these vehicles is best suited to their needs.

For my money, I like a long trade using any of these vehicles that make the most sense to you, but only if UNG is above those 2020 lows. If it's not then you can't touch this thing. We saw Crude Oil trade below zero just a few years ago.

So no, there isn't support at zero—we can't use that joke anymore. Risk management is priority number one—especially when bottom fishing. Also, I'm not going to be quick to take profits either. If I'm going to lay out the risk, I'm going to capture a big chunk of that bounce.

That's what I'm thinking here. So how high can this go?

To learn more about JC Parets, please visit AllStarCharts.com.