Natural Gas Price Fundamental Daily Forecast – Bullish Over $3.030, Bearish Under $2.941

Natural gas futures closed lower on Wednesday as investors continued to digest the impact of the extremely cold weather gripping the U.S. The market traded inside the previous day’s range which suggests investor indecision and impending volatility.

February Natural Gas futures settled at $3.008, down $0.048 or -1.57%.

Prices dipped yesterday because a longer-term forecast showed the return of warmer weather. However, prices could spike higher once again because freezing weather is expected to return this week-end.

According to reports, the U.S. could actually see some spot shortages of natural gas later this year. This all depends on how long the current record cold temperatures last. Some traders are saying that the U.S. could consume upwards of a quarter of the stored natural gas just this month.

On Thursday, the U.S. Energy Information Administration’s weekly storage report is expected to show a drawdown of 225 billion cubic feet. This amount is more than double the normal level for this time of year.

The current price action indicates the futures market is now expecting natural gas storage to be 1.265 trillion cubic feet by the end of winter, compared with the five-year average of 1.7 trillion cubic feet.

Forecast

I’m focusing on the chart pattern because the weather is too unpredictable. We know it’s cold in the U.S. but professional traders tend to focus on the weather 10 to 14 days out.

The main trend is up according to the daily swing chart but the trend actually turned up on December 28. The market needs to cross previous tops at $3.210 and $3.320 to reaffirm the uptrend.

Currently, the market is having trouble with a technical retracement zone. This may be an indication that sellers are coming in to defend the trend. Furthermore, it also indicates that a few of the major short-sellers are in control. The weak shorts have probably been taken out. The market isn’t going to move much higher until a major short-seller lifts his position.

The main range is $3.320 to $2.562. Its 50% to 61.8% retracement zone is $2.941 to $3.030. The market has been straddling this zone for four days. Trader reaction to this zone will determine the near-term direction of the market.

A sustained move over $3.030 will signal the presence of buyers. This could generate the upside momentum needed to challenge $3.097, $3.210 and perhaps $3.320.

A sustained move under $2.941 will indicate the presence of sellers. If this move gains traction then we could see a retracement all the way back to $2.830 to $2.766. A move into this zone will likely be attractive since the main trend is up and this area is a value zone.