Natural Gas Price Fundamental Daily Forecast – Short-Covering Rally Could Strengthen Over $2.743

Natural gas futures are trading slightly higher early Friday after posting potentially bullish closing price reversal bottom on Thursday. The market is also in a position to form a closing price reversal bottom on the weekly chart.

At 1012 GMT, September Natural Gas is trading $2.737, up 0.001 or +0.04%.

The catalyst behind Thursday’s massive short-covering rally and reversal was a government storage report which showed an injection well below expectations.

According to the U.S. Energy Information Administration (EIA), domestic supplies of natural gas rose by 46 billion cubic feet for the week-ended July 13. Traders were forecasting a build of about 59 billion cubic feet, while the average over the last five years for the same week was a rise of 62 billion.

Total stocks now stand at 2.249 trillion cubic feet, down 710 billion cubic feet from a year ago, and 535 billion below the five-year average, the government said.

Forecast

After yesterday’s EIA miss, investors are likely to be watching today’s daily chart pattern to see if there will be a follow-through move to the upside. Taking out $2.743 will confirm the chart pattern. This could lead to the start of a 2 to 3 day counter-trend rally.

The recent sell-off began at $2.992 and may have ended yesterday at $2.671. If the upside momentum continues over the next 2 to 3 days, we could see a rally into its 50% to 6.18% retracement zone at $2.831 to $2.869. A rally back into this zone will give bearish traders a chance to re-short at better price levels.

Thursday’s price action and the government’s storage report may not be enough to change the trend to up, but there is enough there to support a short-term, counter-trend, short-covering rally.