Natural Gas Price Prediction – Price Drop on Technical Breakdown

Natural gas prices moved lower on Tuesday, as traders appear to have liquidated positions. The February contract tumbled 5.3%, but closed more than 3% off the lows of the session. Warmer than normal weather is expected to cover nearly all of the United States over the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration. Warm weather will reduce heating days and put upward pressure on inventories. A blip up in stockpiles will put them at 5-year highs. Hedge funds continued to add to short positions in futures and options, pushing the short-open interest levels to near-record highs.

Technical Analysis

Natural gas prices broke down further on Tuesday following the MLK holiday. A weekly trend line was broken on Friday and prices are now headed to a 4-year low at 1.61. Resistance on natural gas prices is seen near the recent breakdown level at 2.07. Additional resistance is seen near the 10-day moving average at 2.11. Prices are oversold. The RSI (relative strength index) is printing a reading of 26, below the oversold trigger level of 30 which could foreshadow a correction.

Short term momentum could turn positive as the fast stochastic is poised to generate a crossover buy signal in oversold territory. The current reading of 19 is below the oversold trigger level of 20. Medium term momentum is negative as the MACD (moving average convergence divergence) recently generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.