Natural Gas Price Prediction – Prices Slide Following CFTC Report and Cooler Weather Forecast

Natural gas prices moved lower on Monday falling nearly 4%. The decline comes as the weather is expected to moderate from much warmer than normal temperatures, especially in the mid-west. There is one disturbance in the Atlantic that has a 60% chance of becoming a tropical cyclone according to the NOAA hurricane center.  Hedge funds significantly reduced short-positions in futures and options in the latest week which likely led to the short-squeeze in prices.

Technical Analysis

Natural gas prices formed an outside day, which is a higher high a lower low and a lower close which is generally a sign of a reversal. Prices closed at a 4-day low and are likely to test support near the 10-day moving average at 2.05. Resistance is seen near the August highs at 2.28 and then the May highs at 2.50. The 10-day moving average recently crossed above the 50-day moving average which means that a short-term uptrend is in place. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the black with a decelerating trajectory which points to consolidation.

Hedge Funds Reduce Short Positions

Hedge funds significantly reduced short-position in futures and options last week generating a significant short-squeeze. According to the latest commitment of trader’s report released for the date ending 8/4/20, managed money reduced short position in futures and options by 45K contracts while adding 10K contracts to long positions.