Based on the early price action and the current price at $2.036, the direction of the May Natural Gas futures contract the rest of the session on Wednesday will be determined by trader reaction to $2.010.
Natural gas futures are soaring again on Wednesday as the short-squeeze continues. Short sellers are scrambling to cover positions after a major shift in momentum was fueled by Monday’s start of a crude oil price war between Saudi Arabia and Russia. Traders feel that the price war will drive down U.S. oil production which will have a direct effect on natural gas supply.
At 14:56 GMT, May Natural Gas is trading $2.036, up 0.051 or +2.57%.
The main trend is up according to the daily swing chart. The main trend changed to up on a trade through 1.884 on Tuesday. The new main bottom is Monday’s low at $1.657.
The short-term range is $2.060 to $1.657. Its retracement zone at $1.906 to $1.859 is new support.
The main range is $2.229 to $1.657. Its retracement zone at $1.943 to $2.010 is controlling the near-term direction of the market. Breaking out over this zone will put the market in a bullish position.
Based on the early price action and the current price at $2.036, the direction of the May Natural Gas futures contract the rest of the session on Wednesday will be determined by trader reaction to $2.010.
A sustained move over $2.010 will indicate the presence of buyers. The first target is the main top at $2.060. Taking out this level could trigger an acceleration to the upside with $2.229 the next major upside target.
A sustained move under $2.010 will signal the presence of sellers. The next downside targets are layered at $1.943, $1.906 and $1.859. Since the main trend is up, buyers are likely to come in on a pullback into these levels.
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.