Natural Gas Price Futures (NG) Technical Analysis – Strong Downside Momentum Could Drive Market to $2.592 -$2.579

Natural gas futures fell sharply on Friday after the last of the long investors threw in the towel on this year’s winter season after propping the market up for most of the month in anticipation of one last cold blast. Providing the most encouragement for traders to liquidate their positions were weather models calling for warmer/bearish trending patterns for the first half of April.

On Friday, May Natural gas futures settled at $2.662, down 0.50 or -1.84%.

Traders are now preparing for the start of injection season which could begin as early as this week. The bearishness could continue with favorable weather conditions and near record production expected to work in concert to reduce the storage deficit which currently stands 285 Bcf (20.5% below last year’s stocks and 551 Bcf (33.2%) below the five-year average, according to the U.S. Energy Information Administration.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The last main top was made on March 19 at $2.897 so it’s going to take a miraculous rally to turn this market around. If the downside momentum continues then we could see a near-term test of the February 7 main bottom at $2.592 and the January 3 main bottom at $2.579.

The minor trend is also down. This is controlling the momentum. A trade through $2.752 will change the minor trend to up, which will also shift momentum to the upside. A minor uptrend could continue to build if the next minor bottom at $2.788 is taken out. On the downside, the nearest minor bottom is $2.620.

The main range is formed by the December 10 main top at $2.932 and the January 3 main bottom at $2.579. Its retracement zone at $2.756 to $2.797 has been controlling the direction of the market this year, most of the time acting like a pivot zone.

Daily Swing Chart Technical Forecast

With the steep sell-off on Friday, the tone of the market on Monday will determine the trend of the day.

If the bearish tone continues then look for the liquidation pressure to continue with sellers having their eyes set on $2.592 and $2.579. Given the current weather forecast, I don’t expect buyers to step in the way of the sellers until the market reaches a value zone at $2.592 to $2.579.

If traders decide not to press the market any further then they may attempt to rally the market back into the retracement zone at $2.756 to $2.797. Since the main trend is down, sellers are likely to re-emerge on a test of this zone.