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Natural Gas Price Prediction – Prices Consolidate but Momentum is Negative

Warm weather forecast weighs on prices
David Becker

Natural gas prices edged higher creating an inside day which could be seen as a nice respite for the bulls. This follows a rapid decline in prices which was punctuated by Tuesday 5.3%, slide. 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. Imports of natural gas declined in the latest week putting downward pressure on supply.

 

Technical Analysis

 

Natural gas prices consolidated on Wednesday after tumbling Tuesday. Prices are poised to test 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 2.09. 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.

Supply Declines

Supply of natural gas declines as imports from Canada declined. The average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 25% from last week with warmer-than-normal temperatures and lower demand in Midwest and Northeast markets.

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