Natural Gas Price Fundamental Daily Forecast – May Attempt to Fill Gap Down to $3.109

Natural gas futures are trading lower early Monday as investors continue to try to figure out how to play the weather. Over the week-end the key demand areas received a dose of cold weather as expected. The early price action suggests traders have already moved on from the week-end weather and are now looking further into the week.

At 0817 GMT, January Natural Gas futures are trading $3.145, down $0.046 or -1.44%.

According to natgasweather.com, a mild break from the cold weather is expected Tuesday and Wednesday over much of the country, then another cold shot across the northern U.S. next week. Demand is expected to increase to high this week-end.

Forecast

The difficulty in predicting the next cold temperature pattern is at the forefront early Monday. The early weakness could mean warmer or more seasonal temperatures are to be expected over the near-term, or it could mean uncertainty and the lack of clarity is encouraging long liquidation or profit-taking.

We don’t have enough information at this time to make a reasonable short-term forecast, but we do have a chart pattern and it is indicating the natural gas market is testing support.

Last Thursday, the U.S. Energy Information Administration (EIA) reported the first storage withdrawal of the season, but current long investors and new speculators weren’t too impressed with the news, driving prices into a key technical retracement zone.

Currently, the main trend is up according to the daily chart. The last major range is $2.983 to $3.321. Its retracement zone and primary downside target is $3.151 to $3.111. Trader reaction to this zone will tell us if the buyers are still in control or if the sellers are retaking control.

Two weeks ago, the market gapped higher. The gap is $3.109 to $3.154. Based on the current trade, the market is trading inside the gap.

We’re going to be watching trader reaction inside this gap. This may tell us if buyers are stepping in to defend the trend.

Until we get some fresh data on the weather so that we can forecast demand, we’re going to have to rely on the chart pattern, and right now we’re still leaning on buyers stepping in to defend the trend on a test of $3.151 to $3.111.

If $3.111 fails as support, this won’t mean the trend is turning down, but it will mean buyers are going to have to regroup before we see another rally.