Natural Gas Price Futures (NG) Technical Analysis – Gap Lower on Weekly Chart Seriously Damages Bull Market Outlook

Natural gas futures gapped lower on Sunday in reaction to milder temperatures over the week-end and a drop in heating demand. All eyes are now on next week-end’s weather forecast which could contain some cold temperatures. Although we may see a few short-covering rallies due to periodic cold snaps, there is nothing in the current forecasts that show expectations of lingering cold systems so the odds of a prolonged rally are low.

At 0127 GMT, March Natural Gas futures are trading $3.117, down $0.186 or -5.63%.

NatGasWeather is saying, “There will still be a decent cold shot sweeping across the country January 1-3, but the break January 4-7 continues to trend warmer and longer, and where quite a bit of heating demand has been lost since early in the week.”

The forecaster went on to say, “Again, there’s likely to be very cold air over Canada during the second week of January, but cold over Canada is not cold over the U.S. and would need to trend further south for bullish sentiment to return.”

Firstly, the cold air parked in Canada is going to have to enter the U.S. Secondly, it is going to have park itself over key demand areas in the Midwest and on the East Coast. Prices are likely to continue to drop until more consistently cold weather patterns show up in the weather charts.

Weekly Swing Chart Technical Analysis

The main trend is down according to the March natural gas weekly swing chart. The main trend will turn the trend down on a trade through the nearest swing bottom at $2.890.

The main range is $2.810 to $4.608. Trading below its retracement zone at $3.497 to $3.709 is helping to give the market a downside bias. This retracement zone is new resistance.

Weekly Swing Chart Technical Forecast

Today’s gap down on the weekly chart is generating strong downside pressure. If this continues then I expect to see a test of the next two main bottoms at $2.890 and $2.810 over the near-term. The futures contract low is $2.715 from February 23, 2016.

Filing in the gap will be the first sign of renewed strength even if it’s only short-covering. Turning higher for the week on a trade through $3.148 will be the next sign of buying.

If you chart the nearby futures chart, then the main trend turned down earlier today when sellers took out the previous swing bottom at $3.136. If this creates enough downside momentum then we could see the selling extend into the main bottom from 2018 at $2.813 and $2.748.

Essentially, we’re looking at a weak market this week until buyers can turn this market higher and put it in a position to post a weekly closing price reversal bottom.