Natural Gas Price Futures (NG) Technical Analysis – Strengthens Over $8.866, Weakens Under $8.695

Natural gas futures closed slightly lower on Friday after recovering most of its early 5% loss. The sell-off confirmed the previous session’s closing price reversal top that was fueled by reports of rising output and lower forecasts for demand over the next two weeks.

On Friday, July natural gas settled at $8.727, down $0.168 or -1.89%. The United States Natural Gas Fund ETF (UNG) finished at $29.56, down $0.17 or -0.57%.

The longer-term outlook remains bullish, but the short-term technical and fundamental picture has weakened. The bearish fundamental factors include rising production and milder temperatures. The short-term period covers the next two weeks.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has climbed to 95.0 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April.

NatGasWeather’s forecasts have cooled a little for the next week. The service said the period through June 8 appeared to be “mostly comfortable.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has shifted to the downside following the confirmation of Thursday’s closing price reversal top.

A trade through $7.943 will change the main trend to down. A move through $9.447 will negate the closing price reversal top and signal a resumption of the uptrend.

On Friday, the market settled inside a pair of 50% levels at $8.695 and $8.866.

The short-term range is $6.521 to $9.447. Its retracement zone at $7.984 to $7.639 is the nearest support area.

Short-Term Outlook

Trader reaction to $8.695 and $8.866 will determine the direction of the July natural gas market early Monday.

Bullish Scenario

A sustained move over $8.866 will indicate the presence of buyers. If this move is able to produce enough upside momentum then look for a possible retest of the main top at $9.447.

Bearish Scenario

A sustained move under $8.695 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the short-term 50% level at $7.984, followed by the main bottom at $7.943 and the short-term Fibonacci level at $7.639.

Looking ahead, the Fib level is a potential trigger point for an acceleration to the downside.

Side Notes

We expect output to remain steady to higher, so the weather will become the key variable that generates the near-term volatility. We’re also entering “the gap” season which means prices could gap in either direction depending on the overnight, and especially the weekend developments.