Natural Gas Price Futures (NG) Technical Analysis – Cold Weather Forecast, Thin-Trading Conditions Could Trigger Upside Spike

Natural gas futures rebounded from early session weakness to close higher on Friday as forecasters continued to lean toward a shift to colder temperatures around January 1. According to NatGasWeather, a European weather model is starting to show colder trends for the first few days of the new year. This news only adds to the uncertainty surrounding the potential shift to colder weather that trigger elevated levels of volatility last week.

On Friday, February natural gas settled at $3.750, up $0.224 or +5.97%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $3.433 will change the main trend to down.

The minor trend is up. The minor trend turned up on Thursday. A trade through $3.821 will reaffirm the minor trend. This should shift momentum to the upside.

The minor range is $3.433 to $3.821. Its 50% level or pivot is at $3.627. This price is controlling the short-term direction of the market.

The intermediate range is $4.849 to $3.433. Its retracement zone at $4.141 to $4.308 is a potential upside target.

The main range is $3.111 to $4.849. Its retracement zone at $3.775 to $3.980 is the area that provided resistance last week.

Daily Swing Chart Technical Forecast

Based on last week’s price action and the close at $3.750, the direction of the February natural gas market on Monday is likely to be determined by trader reaction to the main Fibonacci level at $3.775.

Bullish Scenario

A sustained move over $3.775 will indicate the presence of buyers. If this move generates enough upside momentum then look for buyers to take out last week’s high at $3.821. This should trigger an acceleration to the upside with the target the main 50% level at $3.980.

The buying pressure should increase over $3.980 with the next target zone coming in at $4.141 to $4.308.

Bearish Scenario

The inability to overcome $3.775 will signal the presence of sellers. This could lead to a retest of the short-term pivot at $3.627. The selling pressure will increase under this pivot with the next targets a pair of minor bottoms at $3.475 and $3.433.

Be careful buying strength and selling weakness on Monday due to thin pre-holiday trading conditions. If weather becomes an issue over the week-end then we could see an exaggerated move to the upside because of the light volume.