Contango and Backwardation Broken Down Wednesday, October 20, 9:44 AM ET, by Market News Video Staff There has been a lot of discussion lately around the words contango and backwardation as ...
Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Wednesday, shares of United States Natural Gas Fund Limited Partnership (AMEX:UNG) entered into oversold territory, hitting an RSI reading of 26.3, after changing hands as low as $5.99 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 69.2. A bullish investor could look at UNG's 26.3 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of UNG shares:
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