Natural Gas Prices Rise Forming Continuation Pattern

Key Insights

• Natural gas prices rallied on Monday.
• The weather is expected to be mixed.
• Natural gas consumption declined.

On Monday, natural gas prices moved higher. The weather is expected to be mixed, colder on the West Coast and warmer on the East Coast for the next 2-weeks. Natural gas consumption declined in the latest week. Natural PMI data showed manufacturing is stalling, which could weigh on prices.

U.S. consumption of natural gas decreased in all sectors this week. Total U.S. consumption of natural gas fell by 9.6% compared with the previous report week, as consumption across all sectors decreased, according to data from the EIA. Consumption in the residential and commercial sectors fell more than in the power and industrial sectors combined, declining 27.6%, with above-average daytime temperatures across the Central and Eastern United States.

Technical Analysis

Natural gas prices rebounded on Monday. Support is seen near the 20-day moving average at 6.8. Target resistance is seen near the April highs at 8.06. The pattern looks like a cup-and-handle, a continuation pattern that follows the trend.

Medium-term momentum is negative but decelerating. The MACD histogram is printing in negative territory with a flat trajectory which points to consolidation. The MACD (moving average convergence divergence) generated a crossover sell signal. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal.