A review of natural gas futures shows the chart pattern exploded above 4.20-4.25 resistance. The iPath Dow Jones UBS Natural Gas (GAZ), however, has not followed the same path.

GAZ has stalled, perhaps owing to its premium price 3-4 weeks ago in its relationship to underlying natural gas prices. Meanwhile, natural gas prices have played catch-up, perhaps moving the GAZ-U.S. Natural Gas ETF (UNG) underlying natural gas price relationship more into line.

If that is the case, then holding GAZ should be okay as long as natural gas prices remain buoyant. However, if natural gas prices decline for any reason (i.e., a sympathetic commodity pull back), then GAZ may undergo a disproportionate sell-off.

Bottom line: I am not thrilled using GAZ as a proxy for natural gas at the moment, and as dull as Encana Corp (ECA) acts I will hold that name as my "big toe" in the natural gas sector for the time being.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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