Natural Gas Price Fundamental Daily Forecast – Bullish Over $2.830, Bearish Under $2.766

Natural gas futures are trading slightly higher early Monday as investors digest the latest data on supply and new weather forecasts. The move was expected because the market closed on Friday inside a key short-term technical retracement zone.

At 0920 GMT, February Natural Gas futures are trading $2.855, up $0.060 or +2.20%.

The news that “natural gas got bomb-cycloned in the new year” is old news. The market already knows that there was a huge spike in demand in the spot market, that Thursday’s U.S. Energy Information Administration’s storage report will show a draw of about 300 billion cubic feet and that it may get cold again in the U.S.

In other news, U.S. natural gas speculators boosted their net long positions for a second week in a row, in the week to January 2, betting prices will rise as supplies tighten after utilities pulled record amounts of gas out of storage during the brutally cold days since Christmas.

According to the U.S. Commodity Futures Trading Commission (CFTC), speculators in four major New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) markets added to their bullish bets by 56,005 contracts to 112,097 in the week to January 2. It was the biggest weekly increase in speculative net longs since December 2016.

Forecast

Let’s take a look at the chart and the price action.

The main range is up according to the daily swing chart. A trade through $3.097 will signal a resumption of the uptrend. If the move creates enough upside momentum, we could see eventual tests of former tops at $3.210 and $3.320.

The short-term range is $2.562 to $3.097. Its 50% to 61.8% retracement zone is $2.830 to $2.766. This zone is very important to the structure of the chart pattern. Since the main trend is up, buyers are likely to come in on a move into this zone since it represents relative value. This is what we are seeing today. These buyers are going to try to form a potentially bullish secondary higher bottom.

So we have a potentially bullish chart pattern, bullish buying from the funds and a potentially bullish EIA report later this week. Now all we need is a trigger to drive the market higher. This trigger will be a new forecast that predicts the return of cold weather over the next two weeks.

Essentially, I’m looking for a bullish tone to develop on a sustained move over $2.830 and for a bearish tone to develop on a sustained move under $2.766.