Natural Gas Fundamental Forecast – January 24, 2017

Natural gas futures posted a closing price reversal bottom on the daily chart on Monday with the March Natural Gas futures contract closing at $3.257, up 0.046 or +1.43%.

Apparently, traders reacted to a change in the weather forecast and possibly oversold technical factors. According to the new forecast, a cold system is expected to sweep across the central and eastern U.S. late this week, however, no one seems to be calling for an Arctic blast, which may mean only a short-term rally can be expected.

Forecast

Traders should prepare for the start of a short-covering rally this week because of the change in the weather forecast.

For the January 23 to 29 time period, natgasweather.com is forecasting the following. “Powerful winter storms across the western U.S. with heavy rain and snow. However, east of the Rockies, conditions remain unseasonably mild with highs of 40’s to 60’s north, and 60’s to 80’s south, even with a strong weather system tracking across the southeastern U.S. and then up the East Coast the next few days with showers and thunderstorms.”

“A colder system will sweep out of the West and into the central and eastern U.S. late in the week with a surge in demand to near or slightly stronger than normal levels after being below for nearly two straight weeks.”

“Overall, natural gas demand will be low to very low through Thursday then increasing to moderate to high.”

The price action suggests investors are buying into this report so be prepared for short-covering. The daily chart shows the market stopped on Monday on a Fibonacci support line at $3.170, slightly above the main bottom at $3.110.

The chart indicates that taking out $3.296 could trigger a strong breakout to the upside with the next major target $3.469 to $3.489.

All we’re looking for is a short-term price adjustment due to the change in the weather forecast. We’ll get more upside action if the weather forecast calls for an Arctic blast and even more if it becomes a