Natural Gas Price Prediction – Prices Consolidate forming Bear Flag

Natural gas prices moved sideways on Wednesday ahead of Thursday inventory report form the Department of Energy. Despite a government shutdown in the United States that has curtailed its issuing of positions from the CFTC in the form of its commitment of trader’s report, the EIA is still issuing inventory and demand reports. Natural gas inventories are expected to decline by 69 Bcf according to Estimize. The weather is expected to be warmer than normal over the next 6-14 days.  The warm weather has allowed the accelerating in inventories to slow down. Warm weather during the winter reducing the amount of heating days necessary allowing production to build up inventories. If a trade deal is completed with China future inventories will continue to decline as exports of LNG begin to accelerate. The future purchases of LNG are one of the items the Chinese will likely agree to purchase.

Technical Analysis

Natural gas prices continue to trade sideways and they are forming either a bottom or a bear flag pattern. There is solid support seen near an upward sloping trend line that come in near 2.90.  A break of this level would generate the completion of the bear flag and see and accelerating down to the 2.75 level. Resistance is seen near the 20-day moving average at 3.48.  The 20-day moving average has recently crossed below the 50-day moving average which means that a medium term down trend is now in place. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory which points to consolidation. Prices remain oversold in the short term as the fast stochastic is printing a reading of 10, which is below the oversold trigger level of 20 and could foreshadow a correction. The trajectory of the fast stochastic is flat which also reflects consolidation.