A United States Natural Gas Fund play is possible, but it's not for the squeamish

Second, there's a tight sell/stop loss: $8.40. The argument forwarded here is that the price of natural gas, despite the likely large increase in proved reserves and stockpiles associated with the accessing of unconventional gas (also called shale gas) through hydraulic fracturing and horizontal drilling, is forming a bottom.

The basis for the bottom? Likely increased demand as a result of the U.S. economic recovery, and better-than-expected U.S. snowbelt demand on a colder-than-normal winter. There's also a price disparity between natural gas and $75-80 oil -- natural gas is much cheaper on an energy unit delivered basis, and the reconciling of which will not involve a collapse in oil's price: oil prices may moderate. What's more likely? Natural gas prices will rise, hence the Buy rating for UNG.

Keep in mind, however, that natural gas, like oil, is an inherently volatile commodity, and more than 10 factors can invalidate the above analysis, not the least of which is the 10-20% chance of a double-dip U.S. recession, hence the high-risk designation for UNG. I'll re-evaluate the Buy rating in late December, when the energy markets should have more data on the type of 2009-2010 winter ahead for the United States.

Stock Analysis: United States Natural Gas Fund is a high-risk fund. Consider buying a 50% position in UNG only if you can tolerate high risk. Under any circumstance, don't buy more than 50% of your UNG position before December 2009. Sell/stop loss if you were to buy shares in UNG: $8.40.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.