Natural Gas Price Outlook – Natural Gas Continues to Struggle

Natural Gas Technical Analysis

The natural gas markets gapped lower to kick off the Monday session as we continue to see a lot of negativity. And you can see that cooler US summer temperatures undercut natural gas prices is one of the major headlines that makes sense. I can assure you that the summer has had some very hot flashes occasionally, but overall, it wasn’t as bad as a lot of people had anticipated.

Furthermore, you also have a situation where natural gas is pretty quiet this time of year as far as demand is concerned. Unless there is a heat wave, you start to see natural gas demand pick up via electric demand. That being said, I do think that we could bounce a little bit further from here, and I look for signs of exhaustion to start shorting. A breakdown below the $2.85 level opens up a move down to the $2.50 level and a rally from here I think struggles to get above $3.20.

Recently, we’ve had the so-called death cross kickoff. That’s when the 50 day EMA breaks down below the 200 day EMA signaling a longer term downtrend. I do think you can only read so much into that though, because quite frankly, here in a couple of months we’ll be focusing on the winter and that of course will drive price up in the United States. It’s a very cyclical market and furthermore, you have to keep in mind that most of the demand in the natural gas futures comes from the United States. It’s not even close, because you are probably trading the Henry Hub contract, the most commonly quoted contract in the world.

It’s not even close to the exports as far as what the demand in the northeastern part of the United States has as an influence. That being said, you could make an argument for a massive head and shoulders, which measures for a move to something like a dollar. I don’t think that’s going to be fulfilled, but it certainly looks very weak at this point. And certainly, it looks like a market where you fade rallies that show signs of exhaustion.

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