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Natural Gas Price Prediction – Prices Rise on Cold Weather Forecast

Prices surged as hedge funds cover
David Becker

Natural gas prices surged higher on Monday rising 7.6% as colder than normal weather is expected to cover most of the United States for the next 6-10 and 8-14 days. The cold weather has formed a ridge trough pattern, where cold weather declines down from Canada into the United States, straight down the middle of the country. This pattern is expected to remain in place for the next 2-weeks which will likely drive up natural gas demand. Hedge funds covered some of their short position in futures and options in the latest week according to the CFTC. Two natural gas drilling rigs retired in the latest week according to Baker Hughes, the oil rig giant.

Technical Analysis

Natural gas prices surged higher on Monday rising 7.6% as the forecast has turned colder than normal. Prices pushed through resistance near a downward sloping trend line that comes in near 1.68 which is seen as support. Target resistance for natural gas prices is now seen near the 50-day moving average at 1.84. 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 (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 also generated a crossover buy signal as the histogram pushed through the zero index level. The trajectory is upward sloping which points to accelerating positive momentum. Short term momentum is also positive as the fast stochastic surged higher after generating a crossover buy signal. The current reading on the fast stochastic is 85, above the overbought trigger level of 80 which could foreshadow a correction.

According to the latest commitment of trader’s report released by the CFTC for the week ending March 31, managed money reduced short position in futures and options by 12.5K contracts while increasing long position by 3.5K contracts. Open interest that is short in the managed money space outnumber open interest that is long by 70K contracts, 209K to 139K.

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