Natural Gas Price Prediction – Prices Tumble as Hedge Funds Add to Short Positions

Natural gas prices tumbled on Monday which was likely due to a couple of factors. There are currently no storms in the Gulf of Mexico, and nothing is shown as a tropical disturbance in the Atlantic. As of Friday, there was a tropical storm in the Gulf of Mexico that has dissipated. The weather is expected to be warmer than normal over the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration. Hedge fund traders added to their short position in futures and options according to the most recent commitment of trader’s report.

Technical Analysis

Natural gas prices reversed course and tumbled on Monday dropping more than 3%. Support is seen near an upward sloping trend line that comes in near 2.20.  Resistance is seen near the 10-day moving average at 2.28 and then the October highs at 2.38. Short term momentum has turned negative fast stochastic generated a crossover sell signal and is accelerating lower. Medium-term momentum is flat as the MACD (moving average convergence divergence) is moving sideways. The MACD histogram is printing near the zero-index level with a flat trajectory that points to consolidation.

Hedge Funds add to Short Position

Managed money continued to add to short position in futures and options betting that natural gas prices will continue to decline. According to the most recent commitment of traders report released for the date ending October 16, 2019, hedge funds added 26K contracts to short position while reducing long position in futures and options by 1.1K contracts. The current open interest shows that managed money is now short 301K contracts compared to long 105K contracts providing an opportunity for a potential short squeeze.