HNU, update.

We recommended this leveraged ETF on natural on April 18th when it was trading at about $8.50. This is about the most trend-persistent commodity for a very long time. What that means is basically that analysts, brokers and other connoisseurs who have absolutely no idea what they are talking about parrot each other and keep repeating the same mantra. When it was around $6 on the commodity this just had to be bought and there was only one single analyst (at Dain Rauscher) that I am aware of who wrote a very good report arguing that natural would  go to about $4 and stay there for a long time. Going long the stuff too early has been extremely costly particularly for those that trade commodities without stops.

In any event sentiment has turned in a truly remarkable way and now we have the likes of Goldman Sachs and T. Boone Pickens firmly on the long side. It is all a bit too much. Here is the chart;

hnu may 2 2012

We do not care about the fundamentals. Natural is often a by product of and consequently it does not have its own demand and supply curves. Next it can not (yet) be moved around so it has a “regional” price. We look only at the EW patterns. Assuming this last leg down on HNU is a 5th wave, typically we should retrace back to about $14 as a minimum. Beyond that $23. In both cases at least a minimum of 3 waves up is required. Presently we are up about 29% and this ETF goes at twice the speed of the itself.