Natural gas’s recent upward correction has been driven by cold weather, and still has a modest chance to extend. However, the key question that should be asked is how long will natural gas prices be able to sustain upward momentum once weather moderates? Several technical factors are already showing that the move up may be over, and that a continued decline may take place sooner than some might have expected.
The move up stalled at $3.045 on Monday morning. From a technical standpoint, this was a bit disappointing because the wave $2.589 – 2.891 – 2.681, which had previously met it 1.00 projection, failed to meet its 1.382 target at $3.098. This was especially negative because Monday’s decline and close below Friday’s $2.91 midpoint triggered a bearish Dark Cloud Cover (marked by the Kase Candles indicator’s pink dot and DarkC label). Dark cloud covers are reversal patterns, and the formation would be confirmed upon a close below Friday’s $2.852 open.
Subsequently, the attempted moves up on Tuesday and Wednesday have failed to close over the $2.94 midpoint of Monday. A close over $2.94 would negate the dark cloud cover, and open the way for another attempt at $3.098 and $3.17, the 1.382 and 1.618 targets for the primary wave up from $2.589, respectively. However, the failure to close over $2.94, so far at least, is negative.
The key for the down move will be a close below $2.85. As previously stated, $2.85 is the confirmation point for the dark cloud cover. It is also the 0.618 projection for the wave $3.045 – 2.839 – 2.974. Therefore, a close below $2.85 would call for at least $2.77. In our detailed weekly price forecast, $2.77 was pegged as the major decision point for a continued decline and retest of the $2.589 contract low. As shown by the blue wave extensions, at minimum, a close below $2.77 should clear the way for the 1.618 projection at $2.64.
Unless there is a shock from tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update, it looks as though the move up has stalled, and that major test of support at $2.77 will take place in the next few days. The near-term outlook for natural gas prices is not yet technically bearish, but a sustained close below $2.77 will help to shift the bias strongly in that direction.
Take a trial of Kase’s Weekly Natural Gas Price Forecast.
Most technical factors now indicate that WTI’s upward correction has failed and that the near term WTI price outlook is negative again. Monday’s decline broke the lower trend line of a bullish ascending wedge. Formations like this break higher around 75 percent of the time, so failures like this do not generally bode well for a continued price rise.
More importantly, WTI prices are about to take out the crucial $48.2 swing low. This level is important because it is the 1.00 projection for the wave $55.05 – 48.2 – 54.92, the 62 percent retracement from $44.37 to $55.05, and the key swing low for the upward wave formation from $44.37. Taking out $48.2 would call for at least $45.5, and very likely to $43.8 and lower.
The only real hope for a continued WTI price rally in the near term would be for prices to hold $48.2. Look for resistance at $51.0 and $52.5. A close over $52.5 would call for another test of the triple top of $55.0.
For a more in-depth analysis, take a free trial of Kase’s weekly crude oil price forecast.
Natural gas’s upward correction has stalled and is oscillating in a narrowing range centered around $2.78. This is a coil formation, which indicates that a breakout move is about to take place. The coil shows undertones of the market’s uncertainty between the balance of long-term bearish fundamentals and recent wide sweeping cold weather that has dominated headlines for the past few days. Typically, prices will break in the direction that the market entered the pattern, in this case up. However, coils are not statistically reliable continuation patterns like flags, pennants, or triangles. Therefore, caution is warranted for both bulls and bears headed into tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update.
A break higher out of the coil and an extended correction would be confirmed by a close over the confluent $2.85 level. The confluence is the crucial factor behind this level because $2.85 is the 0.618 projection for the wave $2.567 – 2.883 – 2.656 and the 38 percent retracement from $3.299 to $2.567. A close over $2.85 would call for $3.00, which is also confluent because it is the 1.00 projection and the 62 percent retracement.
A break lower would be triggered upon a close below $2.73. This is the 0.618 projection for the wave $2.883 – 2.656 – 2.868, and in turn connects to $2.64 and then $2.55 as the 1.00 and 1.382 projections. Both targets are in line with major swing lows at $2.656 and $2.567, so a break lower out of the coil would have major bearish ramifications for the near term.
Take a free-trial of Kase’s weekly energy price forecasts.
Natural gas’ decline stalled at $2.567 on February 6. This was near the very crucial bearish decision point of $2.52. Subsequently prices have risen to $2.857. The market is likely settling into a range that is being supported by external factors (i.e. cold weather), but is searching for the upper end of this range.
A confirmed daily morning star and a few weak momentum signals (white arrows) on KaseX indicate the upward correction should extend. However, the correction met and held the 38 percent retracement from $3.299 to $2.567 at $2.85. In addition, KaseX has already generated a short warning (yellow down triangle), and prices are sitting just below the crucial $2.79 level. The $2.79 level has been major support for week, and it is now key resistance. It was tested one and held already on February 3, so a close over this would be positive for the near term.
Overall, the charts and technical factors discussed indicate that traders are anticipating a bullish U.S. Energy Information Administration (EIA) Natural Gas Weekly Update tomorrow. However, there is some uncertainty to this move, which is why prices backed off the $2.857 swing high morning and are hovering around $2.79.
A close over $2.79 would open the way for $2.85 again, and likely $3.02, which is the 62 percent retracement from $3.299. The $3.02 level should hold unless tomorrow’s EIA number is much more bullish than anticipated. A close below $2.79 would call for $2.68 to be challenged. This is the 62 percent retracement from $2.567 to $2.857. A close below this would then call for another test of the $2.52 decision point.
More information about KaseX.
Take a trial of Kase’s Award Winning Weekly Energy Forecasts.
WTI crude oil is trying desperately to show that a bottom has been made and that a recovery is underway. WTI is testing a crucial decision point at $54.0. This is the 0.618 projection for the wave, $43.58 – 54.24 – 47.36. Most waves that meet the 0.618 projection extend to at least the 1.00 projection, in this case, $58.0. However, a pullback will usually take place first.
Support at $49.9 should hold, but the $47.36 swing low is the level that must hold for the near-term outlook to remain positive. A close below this would negate the wave up from $43.58, and call for a continued decline.
Take a free four week trial of Kase Energy Price Forecasts.
For several weeks $2.79 was major support for natural gas. This level was tested many times, and was finally broken after last week’s bearish U.S. Energy Information Administration (EIA) Natural Gas Weekly Update.
Subsequently, prices have fallen to a $2.608 contract low, and $2.79 has become near-term resistance. The $2.79 level is the completion point for a bullish morning star setup, and was tested on Tuesday when prices rose to $2.783. This level is expected to hold for at least the next few days.
As of this analysis, Wednesday’s decline has setup a pseudo bearish engulfing line. The bearish engulfing line and other technical factors indicate another bearish EIA number may be expected tomorrow.
Trading will likely be extremely choppy over the next few days, but look for $2.79 to hold and for prices to challenge the $2.608 swing low. Ultimately, the decline is expected to extend to the next major target and bearish decision point at $2.52.
Conversely, a close over $2.79 in the next few days would complete the bullish morning star setup and open the way for an extended correction to the $2.852 confirmation point.
For more information about Kase StatWare please visit the Trading Indicators Page. To take a free trial of Kase’s weekly energy forecasts please visit the Energy Price Forecasts Page.
NY Harbor ULSD future’s upward correction extended to 177.7 on Monday. The primary wave 158.9 – 171.7 – 160.5, met its 1.382 projection at 177.7 and is poised to extend to the 1.618 projection of 184.2. This is the decision point for an extended correction and potential recovery. Although it is too early to say that a bottom has been made, a sustained close over 184.2 would open the way for 198.7 and 217.7. A close below 164.3 would indicate the upward correction is complete and call for 153.2 and lower.
To learn more about Kase’s forecasts please visit the Energy Price Forecasts Page.
Natural gas has positioned itself for a break out of the recent coiling pattern that began forming on January 20. March futures tested the crucial $2.79 area this morning, and most technical factors still favor continued decline. However, March’s inability to close below $2.79 is making this recent range look more like a short-term bottoming formation versus a corrective pattern. In addition, a bullish KasePO divergence and first class long permissions (blue dots) for the KEES indicator on the 240-minute equivalent Kase Bar chart indicate prices may attempt to rise above $3.01 again after tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update.
The key for a break higher will be a close over $2.97. This is the 0.618 projection for the wave $2.762 – 3.957 – 2.81. March already stalled at this level once, but overcoming $2.97 would open the way for $3.01, which then connects to $3.08 as the 1.382 projection. The $3.08 level is also near the top of the window that took place between January 16 and 20, so a close over this in coming days would be bullish for the near-term outlook.
That said, even though March has held $2.79 on a closing basis thus far, it has not been able to maintain momentum behind any recent price rise. If natural gas cannot break higher this week, the odds of an extended upward correction will quickly diminish. A close below $2.79 would then open the way for the next leg down, where the first target of that move is $2.71.
Last week’s natural gas price rise was poised to fill December 22nd’s gap from $3.48, but the upward correction stalled at $3.352. The week settled above the $3.09 midpoint of Wednesday, January 12th’s candlestick, leading to speculation that the market might try to rise again early this week. However, Monday’s intraday gap down from $3.056 and settle back below $3.00 was negative for the near-term outlook.
There is still major support at $2.80 that has held so far, but after this morning’s move up stalled and failed to fill to $3.056 gap it looks as though a bearish U.S. Energy Information Administration (EIA) Natural Gas Weekly Update is expected tomorrow.
The key wave for the short-term is $3.352 – 3.024 – 3.228. This wave has already fallen below its 1.00 projection at $2.90 and is poised to meet at least its 1.382 projection at $2.77. This then connects to $2.66 as the 1.618 projection. The $2.66 target is highly confluent for many of the larger and earlier waves down, and is the 0.618 projection for the wave $3.95 – 2.783 – 3.352. The confluence is important because a sustained close below $2.63 would open the way for a decline into the mid-to-low $2’s over the course of the longer-term. Therefore, $2.63 is a potential stalling point for the decline.
The KaseX indicator on the 240-minute equivalent Kase Bar (KBAR) also confirms the negative outlook and has generated several short signals (purple arrows) during the decline from $3.352. The most recent short signal came after the $3.015 swing high this morning. At this point, there are no warning signals that indicate profit should be taken or that short trades should be exited. This will likely change though should prices recover above the $3.015 swing high.
First resistance ahead of the EIA report is $3.06, which is near the top of the $3.056 gap. A move above this would call for 3.15, which is the 0.618 projection for the wave $2.783 – 3.352 – 2.821. The $3.15 level is confirmed as the 62 percent retracement from $3.352 to $2.821. It is also interesting to note that this morning’s rise to $3.015 stalled just below the 38 percent retracement at $3.02. This is another negative factor.
To summarize, the bias is negative, and the move down is expected to continue. There is strong support at $2.80, but a move below this would call for at least $2.77 and very likely $2.66. Resistance at $3.06 will likely hold, but a move above that would open the way for at least $3.15.
For more information about KaseX please visit our Trading Indicators Page. To take a trial of Kase’s in-depth weekly energy forecasts on natural gas and crude oil please visit the Energy Forecasts Page.
Brent has been trading in a corrective range for the past several days, but fell to major support at $47.7 on Tuesday. This is the 0.618 projection for the wave $52.42 – 48.07 – 50.41. The $47.7 projection connects to a major target at $45.8 as the 1.00 projection. This is also the 1.618 projection for the largest and most important wave down from the $111.38 contract high. KaseX confirms the negative call with confirmed short signals (purple triangles) on the 120-minute equivalent Kase Bar chart.
For more information about KaseX please visit our trading indicators page. The learn about our forecasts please visit our energy forecasts page.