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Natural Gas Price Prediction – Prices Slide but Weather is Turning Colder

Prices consolidate as hedge funds add to short positions
David Becker

Natural gas prices eased on Monday after, rising nearly 3.3% last week. Much colder than normal weather is expected to move into the mid-west over the next 6-10 and 8-4 day and then eventually cold is will move east. This has helped buoy prices. Hedge funds added to both long positions and short positions in futures and options according to the latest commitment of trader’s report released by the CFTC.

 

Technicals

Natural gas prices eased on Monday after breaking 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 2.16. 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 and is accelerating higher.

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Commitment of Trader’s Report

The weather has been warm, but inventories remain near the 5-year average range and any cold weather could generate a squeeze. According to the most recent commitment of trader’s report released for the date ending 1/7/2020, managed money added 24K contracts to their short position in futures and options while increasing their long position by 15K. Open interest that is short futures and options in the managed money space outnumber open interest that is long futures and options by 2.7 to 1.

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