Natural Gas Price Fundamental Daily Forecast – Sellers Targeting $2.735, Solid Resistance $2810

Natural gas futures are trading sharply lower early Tuesday after yesterday’s spike to the upside failed to draw enough buyers to sustain the move. It’s also an indication that the recent three day strength was driven by aggressive short-covering rather than real buying. The speculative buying was just strong enough to take out the weak shorts.

At 0828 GMT, June Natural Gas futures are trading $2.750, down $0.034 or -1.22%.

Yesterday’s rally stopped at $2.806. This was just shy of a technical resistance level at $2.807 and slightly below the previous main top at $2.810. This served as proof that the bigger traders want to stay short and were willing enough to come in to defend the downtrend.

Forecast

Despite forecasts calling for another rare drawdown in April, today’s early price action strongly suggests a bearish shift in the weather forecast.

Overall demand is expected to be high through Friday – Saturday, then easing to moderate. This assessment is based on the forecast of cooler weather, followed by mild breaks then another cool shot in the Midwest and Northeast late in the week. This report was already priced into the market.

The new weather forecast, possibly driving today’s price action, probably calls for the return of warmer weather into the end of the month. This news coupled with reports of rising production may have been enough to kill the rally.

Given yesterday’s price action, the key resistance is $2.810. The ballgame will change if this level is taken out. On the downside, the key number to watch is $2.735. We could see a technical bounce on the first test of this level, but if it fails then look out to the downside because the next support doesn’t come in until $2.660 to $2.638.