Natural Gas Price Futures (NG) Technical Analysis – Short-Covering Could Drive Market into $2.623 to $2.657
Natural gas futures finished higher on Friday, driven by a combination of technical and fundamental factors. Technically, the market rallied after confirming the previous session’s closing price reversal bottom. Fundamentally, traders continued to ignore this week’s bearish government storage report, while focusing on short-term cold snaps and higher spot gas prices.
On Friday, June natural gas futures settled at $2.580, up $0.032 or +1.26%.
Although we’re looking for a short-term counter-trend rally, the move is not likely to last and is most likely to set up the next shorting opportunity. Last week, on a year-to-year basis, natural gas in storage turned a surplus. However, it is still below the 5-year average.
Daily Technical Analysis
The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of a closing price reversal bottom on Thursday and the subsequent confirmation on Friday. This could fuel at 2 to 3 day counter-trend rally.
A trade through $2.477 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through $2.768.
The short-term range is $2.768 to $2.477. Its retracement zone at $2.623 to $2.657 is the first upside target. Since the main trend is down, sellers are likely to come in on a test of this zone.
The main range is $2.941 to $2.477. Its retracement zone at $2.709 to $2.764 is the major upside target.
Daily Technical Forecast
Based on last week’s price action and the close at $2.580, the direction of the June natural gas futures contract on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 2.557. This angle provided support on Friday.
A sustained move over $2.557 will indicate the presence of buyers. If this creates enough upside momentum then look for the buying to extend into the short-term 50% level at $2.623. Look for sellers on the first test of this level.
Overtaking $2.623 will indicate the buying is getting stronger with the next targets a short-term downtrending Gann angle at $.648, a short-term Fibonacci level at $2.657 and a longer-term downtrending Gann angle at $2.661. The latter is the trigger point for an acceleration into a resistance cluster at $2.708 to $2.709.
A failure to hold $2.557 will signal the return of sellers. This could trigger a break into a pair of uptrending Gann angles at $2.517 and $2.497. The latter is the last potential support angle before the $2.477 main bottom. If this fails then look for the selling to possibly extend into the February 25, 2016 main bottom at $2.460.