Natural gas prices reverse on milder weather outlook
Natural gas prices abruptly reverse lower on milder US weather outlook; Monday’s 14.52 percent drop was the worst going back to June of 2022 and a bearish Rising Wedge breakout is now in play on the four-hour timeframe.
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Worst day since June 2022
Natural gas prices abruptly turned lower on Monday after completing the best week since July. The 14.52% drop represented the worst 24-hour period since June 2022. From a fundamental standpoint, the weather was a key driver for the heating commodity.
According to Bloomberg, US weather estimates shifted milder over the weekend. That would likely open the door to less demand amid still-elevated inventory levels.
Focusing on the daily chart below, natural gas is back to the 20-day Simple Moving Average (SMA). The latter is immediate support.
A confirmatory breakout lower could open the door to revisiting the February low at 1.967. Beyond the latter is the 2020 bottom at 1.44. Meanwhile, immediate resistance is a combination of the 50-day SMA and the 23.6% Fibonacci retracement level at 3.297.
Natural gas daily chart
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Rising wedge breakout in focus
Things are starting to look bearish again in the near-term 4-hour timeframe. Since the end of February, I have been highlighting a bearish Rising Wedge chart formation that has been brewing. Overnight, natural gas has confirmed a breakout under this pattern.
This is opening the door to resuming the downtrend that occurred from the end of December to the end of February.
Immediate support is a combination of the 100-period SMA as well as the midpoint of the Fibonacci retracement level at 2.498.
Clearing these technical obstacles exposes the 61.8% and 78.6% levels at 2.373 and 2.195, respectively. On the other hand, immediate resistance is at the 38.2% level at 2.622 before the 23.6% point at 2.777 comes into focus.
Natural gas four-hour chart
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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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