Natural Gas Prices Break Out and are Poised to Test Higher Levels

Key Insights

• Natural Gas prices consolidated, broke higher
• Consumption rose in the latest week
• The weather is expected to bifurcate on the Coasts.

On Tuesday, natural gas prices broke out to fresh highs. The weather is expected to be much colder than normal on the West Coast and much warmer than normal on the East Coast. Consumption surged in the latest week.

U.S. total consumption of natural gas increased substantially this week. Total U.S. consumption of natural gas rose across all major consumption sectors by 15.0% compared with the previous report week. Natural gas consumption in the residential and commercial sectors increased the most this report week, rising by 39.2% as average daytime temperatures across the eastern United States were colder than normal.

Technical Analysis

On Tuesday, natural gas prices broke out to fresh highs,and is poised to test higher level. Target resistance is seen near the October highs at 6.46. Support is seen near the 10-day moving average at 5.58.

Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices have moved back into overbought territory with the Fast Stochastic printing a reading of 95, above the overbought trigger level of 80. The RSI is also overbought, printing a reading of 74, above the overbought trigger level of 70.

Medium-term momentum has turned positive. The MACD (moving average convergence divergence) index makes a crossover buy signal. This scenario occurs when the MACD line (the 12-day moving average minus the 26-day moving average, crosses above the 9-day moving average of the MACD line.