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David Becker
Oil pipeline – concept

Natural gas prices surged higher rebounding sharply and climbing 5%. Prices were unable to pierce through resistance levels. The weather is expected to remain close to normal over the next 6-10 and 8-14 days, with warmer than normal weather on the east coast and cooler than normal weather covering the mid-west. Inventories remain near the 5-year average for this time of year according to the Energy Information Administration. Managed money added to short position in futures and options according to the latest commitment of trader’s report, but many were likely squeezed out over the past two trading sessions.

Technical analysis

Natural gas prices rebounded 5% and recaptured half of the losses seen last week but were unable to recapture resistance near the breakdown level near 2.47. Support is seen near last week’s lows near 2.27. Resistance on natural gas prices is seen near former support at 2.48. Medium-term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory which points to a potential correction in natural gas prices.

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Hedge Funds are Bearish

Hedge funds continue to add to short position in futures and options according to the latest commitment of trader’s report released for the date ending 11/26/19. According to the CFTC, managed money added 48K contracts to short position in futures and options while adding 2K contracts to long positions. The current open interest for the managed money category is 291K contracts approximately 2.5-times open interest that is long natural gas futures and options.

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