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David Becker
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Natural gas prices continued to break out to fresh contract highs but finished well off the peak of the day. Prices hit a new contract high at $4.18 per MMbtu easing to close up 1% for the day. 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 10% chance of becoming a tropical cyclone over the next 48-hours. U.S. consumption of natural gas rose 1% in the latest week.

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Technical Analysis

Natural gas prices continued to rally on Monday. The August contract closed at an all-time high for the 6th consecutive trading session. Target resistance is now the 2018 highs at 4.92. Support is seen near 10-day moving average at 3.84. 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 79 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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Power Generation Drives Demand

Natural gas consumption in the electric power sector drives total consumption higher. Total U.S. consumption of natural gas rose by 1.5% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 3.3% week over week as much of the West and Northern Plains continued to experience higher-than-normal temperatures.

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