Natural Gas Futures (NG) Technical Analysis – Closing Price Reversal Top May Lead to Short-Term Correction

Natural gas futures settled lower on Friday on profit-taking ahead of the long U.S. holiday week-end. Earlier in the day, the market continued its more than week-long rally with a surge into $2.944. The rally was fueled by forecasts for hot temperatures over most of the United States and a miss on the U.S. Energy Information Administration weekly storage report that raised concerns about filling the current supply deficit before the start of the summer cooling season.

July Natural Gas futures settled at $2.963, down $0.008 or -0.27%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may have shifted to the downside with the formation of a potentially bearish closing price reversal top.

A trade through $2.994 will negate the chart pattern and signal a resumption of the uptrend. A move through $2.942 will confirm the chart pattern. This could trigger the start of a 2 to 3 day correction.

The short-term range is $2.804 to $2.994. If there is confirmation of the chart pattern then look for a break into its retracement zone at $2.899 to $2.877.

The major range is $3.043 from October 29, 2017 to $2.605 from December 21, 2017. Its retracement zone is $2.824 to $2.876. Traders should consider this zone support. Furthermore, trading on the strong side of this zone is giving the market an upside bias.

Daily Swing Chart Technical Forecast

Based on Friday’s chart pattern, the direction of natural gas is likely to be determined by trader reaction to $2.942.

Holding above $2.942 will indicate the presence of buyers. If this creates enough upside momentum we could see a test of $2.994. Taking out this high could trigger a further rally into a cluster of tops at $3.010, $3.012 and $3.019. The latter is a potential trigger point for an acceleration into $3.043.

Taking out $2.942 will confirm the closing price reversal top. This could trigger an acceleration to the downside with the short-term 50% level at $2.899 the first downside target. Since the trend is up and the fundamentals supportive, buyers could step in on a test of this level.