Natural Gas Technical Analysis and Near-Term Outlook
This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.
Natural gas failed to capitalize on Tuesday’s decline and the close at Monday’s $2.76 midpoint. Monday’s initial gap down was likely an exhaustion pattern and was followed by the formation of a daily bullish engulfing line that helped to confirm daily bullish KasePO, KaseCD, RSI, Stochastic, and MACD divergences. These patterns and signals indicate that a bullish reversal for the December contract might be underway.
Furthermore, today’s rise to $2.80 suggests that Tuesday’s pullback was the corrective leg of a wave up from $2.514 that projects to $2.84 as the smaller than (0.618) target. Overcoming $2.80 will call for a test of $2.84, a close above which will open the way for $2.88 and then a test of this wave’s $2.96 equal to (1.00) target.
However, this is still a somewhat tight call for the near term. The late move down from $2.796 has taken out the 38 percent retracement of the rise from $2.651. The small wave down from $2.796 makes a connection to the $2.70 level, which is in line with the 62 percent retracement and smaller than target of the wave down from $2.818. Falling below $2.70 will call for a test of this wave’s $2.63 equal to target. The $2.63 level is key support for the near term because it is also the 62 percent retracement of the rise from $2.514. Closing below $2.63 will put the near-term odds in favor of prices falling to the $2.57 intermediate (1.382) and $2.53 larger than (1.618) targets.
