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David Becker
Oil refinery

Natural gas prices moved lower on Monday declining as warmer than normal weather is expected to cover most of the United States for the next 6-10 and 8-14 days. Prices declined4.5% on Monday after dropping nearly 4% in the prior week. Hedge funds reduced both long and short position in futures and options according to the latest commitment of traders report.

Technical Analysis

Natural gas prices moved lower on Monday slicing through support near an upward sloping trend line that comes in near 2.62 and the November lows at 2.52, which is now seen as short term resistance. Short term momentum is negative the fast stochastic accelerated lower with a downward sloping trajectory. The fast stochastic is now printing a reading of 15, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in red with a declining trajectory which points to lower prices.

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Hedge Funds Reduce Natural Gas Positions

Hedge funds reduced their short and long position but continued to cover during the latest week. According to the latest reading of the commitment of trader’s report released by the CFTC, hedge funds reported short position in futures and options by 25K contracts while reducing long position in futures and options by 13K contracts. Open interest that is short futures and options in the managed money space is nearly double managed money that is long, 202K contracts to 115K contracts.

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