NatGas Futures Close Lower as Sellers Fade Early Rally

U.S. nearby natural gas futures settled lower on Friday after rallying over 1% earlier in the session. The price action produced a potentially bearish closing price reversal top on the daily chart.

This chart pattern doesn’t represent a change in trend, but if confirmed on Monday, it could trigger the start of a 2 to 3 day correction. Sellers came in to stop the buying at $6.538, just slightly above the October 8, 2021 main top at $6.457.

On Friday, May natural gas futures settled at $6.278, down $0.081 or -1.27%. The United States Natural Gas Fund ETF (UNG) finished at $22.10, down $0.27 or -1.21%.

Fundamentally, higher global prices since Russia’s invasion of Ukraine have kept demand for U.S. liquefied natural gas (LNG) exports near record highs.

Meanwhile, U.S. prices have also climbed on growing worries that cooler weather expected in coming weeks will keep heating demand high and prevent utilities from adding much gas to storage during that time. U.S. gas stockpiles are currently about 17% below the five-year (2017-2021) average for this time of year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum will shift to the downside if sellers take out Friday’s low at $6.257. This will confirm the closing price reversal top and could trigger the start of a 2-3 day correction.

A trade through $6.538 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $5.270 will change the main trend to down.

The minor range is $5.270 to $6.538. Its 50% level at $5.904 is the nearest support.

The short-term range is $4.509 to $6.538. Its retracement zone at $5.524 to $5.284 is another support area.

Short-Term Outlook

The direction of the May natural gas futures contract early Monday is likely to be determined by trader reaction to $6.398.

Bearish Scenario

A sustained move under $6.398 will indicate the presence of sellers. Taking out $6.257 will confirm the closing price reversal top and could create the downside momentum needed to challenge the pivot at $5.904.

Since the main trend is up, look for a technical bounce on the first test of $5.904. If this level fails then look for the selling to possibly extend into the short-term 50% level at $5.524.

Bullish Scenario

A sustained move over $6.398 will indicate the presence of buyers. Taking out $6.538 will negate the closing price and signal a resumption of the uptrend. If this move produces enough upside momentum we could see a test of the November 14, 2018 main top at $6.908.