Natural Gas Price Futures (NG) Technical Analysis – Taking Out $2.605 Confirms Last Week’s Closing Price Reversal Bottom

Natural gas futures closed higher last week after a successful test of its February 25, 2016 main bottom at $2.477. The move fueled a short-covering rally that attracted enough buyers to form a potentially bullish closing price reversal bottom. Fundamentally, the rally was helped by forecasts of lingering cold into the end of the month and early next week. Higher spot prices were also supportive. Nonetheless, the rally is expected to be short-lived because of rising production and milder temperatures ahead. Furthermore, on a year-to-year basis, there is a storage surplus. Storage, however, remains below the five-year average.

Last week, June natural gas settled at $2.580, up $0.045 or +1.78%.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. However, last week’s price action indicates that momentum may be shifting to the upside. The closing price reversal bottom will be confirmed by a trade through $2.605. This could trigger the start of a 2 to 3 week counter-trend rally.

A trade through $2.477 will negate the closing price reversal bottom and signal a resumption of the downtrend with the next major support on the weekly chart coming in at $2.250.

Last week’s range was $2.477 to $2.605. Its 50% level or pivot at $2.541 is potential support. Aggressive counter-trend buyers are likely to come in on a test of this pivot in an effort to form a secondary higher bottom. If it fails to hold then look for further downside pressure.

The main range is $2.941 to $2.477. If the reversal bottom is confirmed then its retracement zone at $2.709 to $2.764 will become the primary upside target. Since the main trend is down, sellers are likely to come in on a test of this area.

Weekly Technical Forecast

Based on last week’s closing price reversal bottom and close at $2.580, the direction of the June natural gas market this week is likely to be determined by trader reaction to last week’s high at $2.605.

Bullish Scenario

Taking out last week’s high at $2.605 will confirm the closing price reversal bottom. This will shift momentum to the upside. If the buying is strong enough then look for the move to possibly extend into the steep downtrending Gann angle at $2.701. Sellers could come in on the first test of this angle.

Overtaking $2.701 will indicate the buying is getting stronger. This could trigger a further rally into the 50% level at $2.709. Once again, look for sellers on the move.

Bearish Scenario

The inability to overcome or sustain a rally over $2.605 will signal the presence of sellers. This could lead to a test of the short-term pivot at $2.541. If the market is setting up for a short-covering rally then buyers will come in on a test of this level. If it fails then look for the selling to possibly extend into $2.477.

Crossing to the weak side of a downtrending Gann angle at $2.461 will put the market in a bearish position.