Natural Gas Price Futures (NG) Technical Analysis – Traders Not Surprised by Break into 25-Year Low

Natural gas futures closed lower on Friday in another volatile session related to demand concerns over the coronavirus pandemic. The market garnered some support early in the session related to Thursday’s friendly U.S. Energy Information Administration (EIA) weekly storage report. Buyers disappeared, throughout the session, however, as uncertainty over future demand outweighed a slightly bigger-than-expected storage draw. On March 18, U.S. natural gas futures plunged 7% to their lowest level since 1995.

On Friday, May Natural Gas settled at $1.675, down $0.051 or -2.95%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. After an attempted rally failed to draw enough buyers to continue the move earlier in the month, the main trend turned down on March 18 when sellers took out the last swing bottom at $1.657.

A trade through $1.594 will signal a resumption of the downtrend. The main trend will change to up on a move through the last swing top at $2.044. This is highly unlikely, but there is room to retrace into a pair of retracement zones.

The short-term range is $2.044 to $1.594. Its retracement zone at $1.819 to $1.872 is the first upside target area. Since the main trend is down, sellers are likely to come in on a test of this area.

The main range is $2.229 to $1.594. Its retracement zone at $1.912 to $1.986 is the second resistance area. This zone is controlling the longer-term direction of the market.

Short-Term Outlook

Traders are saying we could see a near-term rally early next week because of a slight increase in demand last week, but gains are likely to be limited because the overall fundamental picture is still bearish. Weighing on prices at this time are demand concerns due to the shutdown of schools and businesses, plunging crude oil prices and forecasts for milder temperatures.

Technically, trader reaction to a downtrending Gann angle at $1.764 will set the tone on Monday. If this creates enough downside momentum then look for a retest of the 18-year low at $1.594.

Breaking out above the downtrending Gann angle at $1.764 won’t change the trend to up, but it could trigger a spike into $1.819 to $1.872. Since the main trend is down, sellers are likely to come in on a test of this area, leading to a resumption of the downtrend.

The break into an 25-year low really didn’t surprise traders. Many were already prepared for the move since natural gas prices were already trading near their lowest levels in years as near-record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter.