March Natural Gas Monthly Technical Analysis for February 2017

Natural gas futures gapped open lower in January and never looked back as a dramatic shift in the weather caused a drop in demand. The break last month represents those longs who bought in December, hoping for an arctic blast in January, and are now being forced out of their positions because the outlook for February isn’t much better for the bulls.

March natural gas futures closed at $3.117, down $0.567 or -15.39%.

Technical Analysis

The main trend is still up according to the daily swing chart, however, momentum has shifted to the downside. A trade through $2.764 will turn the main trend to down. A move through $3.828 will change the main trend to down.

The main range is $4.606 to $2.468. Its retracement zone is $3.537 to $3.789. This zone is resistance in February.

The short-term range is $2.468 to $3.828. Its retracement zone is $3.148 to $2.988. This zone is currently being tested and could turn into support.

Forecast

Although the trend is up, momentum is down and with the market closing on its low, we could see a follow-through break in early February.

The direction of the market this month will be determined by trader reaction to the 50% level at $3.148 and the 61.8% level at $2.988.

A sustained move over $3.148 will signal the presence of buyers. This could trigger a short-covering rally, but unless extreme cold returns, I don’t see this market moving above $3.537.

Taking out $2.988 will indicate the presence of sellers. This could drive the market into the main bottom at $2.764. I can build a case of buyers coming in as the market nears the main bottom because the fundamentals remain strong.

Going into the spring, natural gas will begin with a storage deficit, low production and strong exports. All three of these factors may be enough to build a support base. This could drive the market higher later in the year as temperatures start to warm and demand increases.

Of course, bullish investors would like to see at least one more blast of cold air before the heating season is over. They would like to see as big a storage deficit as possible going into the spring when demand starts to drop and production increases.