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Natural Gas ETF Clears 50-Day Average; First Time Since July 2011

tlydon@globaltrend.com (Tom Lydon)

An exchange traded fund that invests in natural gas futures rallied to break through its 50-day simple moving average on Tuesday for the first time in nearly a year.

The last time U.S. Natural Gas Fund (UNG - News) traded above this technical indicator was in July 2011.

Still, the $849 million ETF remains in negative territory for 2012 with a loss of 35.3% as of May 7, according to Morningstar. The fund has been hit by warm temperatures this winter and an oversupply of natural gas, as well as contango in futures contracts.

The commodity ETF gained 4.3% in afternoon trading Tuesday. [Natural Gas Rallies but ETN Sees Weekly Loss]

Natural gas futures were up sharply late Tuesday after trading in the red earlier in the session. The commodity was lifted by signs of rising demand from power utilities and recent output cuts, according to Dow Jones Newswires.

“It’s holding the gains from last week,” said Tom Saal, vice president of energy trading at INTL Hencorp Futures, in the report. “It could be a combination of declining production and increased demand from coal switching” among power generators. [Natural Gas ETF Rallies Nearly 20% from Low]

“Prices may have a few more days to try the upside, possibly including a reaction to Thursday’s storage report, but could fall back in a ’sell-the-news’ cycle beyond that point,” added Tim Evans, energy analyst at Citi Futures Perspective, in the article.

U.S. Natural Gas Fund