Natural Gas Prices Whipsaw After Testing Resistance

Key Insights

• Natural Gas prices whipsawed and edge higher.
• The weather is expected to bifurcate on the Coasts.
• The Department of Energy Releases its Inventory Report Thursday.

On Wednesday, natural gas prices surged higher on the open but closed nearly unchanged. The weather is expected to be much colder than normal on the West Coast and much warmer than normal on the East Coast. Expectations are for inventories to rise.

The injection season has started. April through October is the period when natural gas stockpiles start to increase as storage is placed in caves during the spring, summer, and beginning of fall. According to survey provider Estimize, expectations are for inventories to rise by 8 Bcf.

Technical Analysis

On Wednesday, natural gas prices broke surged higher testing the October highs at 6.40 but were unable to break out to new highs. Target resistance is seen near the October highs at 6.46. Support is seen near the 10-day moving average at 5.65.

Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The RSI is also overbought, printing a reading of 73, 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.