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David Becker
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Natural gas prices continued to break out to fresh contract highs on Friday rising 2.5% and finished the week up 10.5%. Warmer than normal weather is expected to cover most of the United States over the next 6-10 and 8-14 days. According to the National Oceanic Atmospheric Administration, there is one tropical storm in the Atlantic or Gulf of Mexico that has a 40% chance of becoming a tropical cyclone over the next 48-hours. Natural gas exports to Mexico hit a record high in June.

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Technical Analysis

Natural gas prices continued to rally on Friday. The August contract closed at an all-time high for the 5th consecutive trading session. Target resistance is now the 2018 highs at 4.92. Support is seen near the former highs at 3.82 and then the 10-day moving average at 3.80. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought. The current reading on the RSI is 78 above the overbought trigger level of 70 which could foreshadow a correction. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line crosses above the MACD signal line. The MACD histogram also generated a crossover buy signal.

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Strong Demand Drives Prices

High demand and supply constraints cause prices to increase further this week. Prices in the Western U.S. were the driving force behind the upward momentum. According to the EIA, the price at SoCal Citygate in Southern California increased $1.07 from $6.45/MMBtu last Wednesday to $7.52/MMBtu.

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