Nat Gas Could Strengthen Over $4.600, Weaken Under $4.460

Natural gas futures dropped on Friday as investors continued to react to the latest government inventory report that surprised to the downside. Some softening in early March heating demand also weighed on prices.

At 21:15 GMT, April natural gas futures are trading $4.385, down 0.045 or -1.02%.

On Thursday, the Energy Information Administration (EIA) reported a 190 Bcf withdrawal from natural gas storage inventories for the week-ending February 11, coming in a little lower than some analysts had expected.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower following the confirmation of Thursday’s closing price reversal top.

A trade through $4.645 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $3.867 will change the main trend to down.

The short-term range is $5.053 to $3.867. Its retracement zone at $4.460 to $4.600 is resistance. This zone helped stop the rally into $4.645 on Thursday.

The main range is $3.383 to $5.053. Its retracement zone at $4.218 to $4.021 is potential support.

Short-Term Outlook

The direction of the April natural gas futures contract over the near-term is likely to be determined by trader reaction to $4.460 and $4.600.

Bearish Scenario

A sustained move under $4.460 will indicate the presence of sellers. If this move is able to generate enough downside momentum then look for a possible plunge into the main retracement zone at $4.218 to $4.021.

Bullish Scenario

A sustained move over $4.460 will be the first sign of strength. This could trigger a quick rally into $4.600, followed by $4.645.

The minor top at $4.645 is a potential trigger point for an acceleration to the upside with $5.053 the next potential upside target.

Side Notes

Ahead of the three-day week-end, traders are looking for volatility when the market reopens on Tuesday.