Natural Gas – Gaps and Spikes Higher as Cold Shots Forecast to Close Out Month

After gapping higher early Monday and drifting sideways ahead of the regular session opening, natural gas futures are soaring, taking out the earlier intraday high at $3.143 and positioning itself to challenge a key technical retracement zone at $3.215 to $3.320. Expectations of colder temperatures next weekend and into the next week are fueling the aggressive short-covering and speculative buying.

At 15:24 GMT, March Natural Gas is trading $3.208, up $0.263 or +9.00%.

Colder Weather is Coming

According to NatGasWeather for Monday, “As was mentioned in our reports Friday, the risk going into the weekend was toward colder trends and the weather models did just that over the break, specifically with a frigid cold shot into the US this coming weekend where lows with it will drop into the -20s to 20s for very strong demand. Additional cold shots are expected to follow to close out the month. The markets continue pricing in the coming colder pattern with prices up sharply.”

New Short-Term Forecast

For January 14 to January 20, NatGasWeather is saying, “A weather system will exit the Mid-Atlantic Monday with snow ending. It will be chilly across the northern US through Monday with highs of 20s and 30s, while mild over much of the rest of the US with 40s to 80s. As the week progresses, high pressure will gain ground over the southern 2/3rds of the country as highs warm into the 60s and 70s over Texas, South, and Southeast. There will be glancing shots of cold across the far northern 1/3 mid-week to locally stronger demand. Although, of greatest interest, a frigid cold shot will push into the northern, central and southern US next weekend. The West will see a mix of mild and cool as weather systems track inland. Overall, national demand will be moderate-low this week, increasing to high this weekend.”

Technical Outlook

The upside momentum from Friday’s change in trend and Monday’s gap higher opening has driven the March Natural Gas futures contract into a key 50% to 61.8% retracement at $3.215 to $3.320. This is the first objective.

Overtaking $3.320 will indicate the buying is getting stronger with the next Gann angle target coming in at $3.359. This is the trigger point for an even stronger acceleration to the upside with $3.690 the next major upside target.