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David Becker

Natural gas prices surged higher on Friday, rising nearly 3%, as cold air started to slip down into the US. Prices have been under significant pressure and hedge funds remain short, expecting prices to continue to move down. The weather is expected to remain colder than normal on the west coast and warmer than normal on the east coast over the next 6-10 days. There is the chance that a ridge trough pattern is forming that will push cold air down from Canada helping to drive natural gas prices higher. Demand rose across all sectors in the latest week according to a report from the EIA.

Technicals

Natural gas prices broke out of a tight range and are headed for short term resistance near a downward sloping trend line that comes in near 2.25. Support is seen near the 10-day moving average near 2.17. Additional support on natural gas prices can be seen by looking at a long term trend line on a weekly chart that comes in near 2.07. Momentum has now turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD index (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with a rising trajectory which points to higher prices. Short term momentum has turned positive as the fast stochastic rebounded from below the 20-oversold trigger level which points to a possible rebound.

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Demand Rises

Demand rose across all sectors according to the EIA. Total US consumption of natural gas rose by 10% compared with the previous report week, according to data from IHS Markit, amid seasonally cold temperatures. Natural gas consumed for power generation climbed by 11% week over week. Industrial sector consumption increased by 2% week over week. In the residential and commercial sectors, consumption increased by 15%.

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