Short-Term Natural Gas Forecast – March 7, 2018

Since February 12, April natural gas had risen in a choppy upward sloping range that formed a bearish flag. However, prices broke higher out of the flag today and settled above the pattern’s upper trend line. The flag’s failure to break lower is bullish for the near-term and calls for a larger upward correction before the move down ultimately continues.

The next objective is $2.80, which is the 100-day moving average and a confluent projection for the multitude of waves and sub-waves that formed the flag. A close above this would call for $2.83 and possibly $2.87.

The $2.83 target is a potential stalling point because it is in line with the 62 percent retracement of the decline from $2.983 and the 200-day moving average. If the move up is going to remain a “normal” correction, $2.83 should hold.

April Natural Gas - Daily
April Natural Gas – Daily

Key resistance is $2.87. This is the smaller than (0.618) target for April natural gas’ wave $2.487 – 2.983 – 2.565. Waves that meet the smaller than target typically extend to the equal to (1.00) target, in this case, $3.06. Therefore, should April settle above $2.87 look for prices to rise above $3.00 again.

All of that said, the long-term outlook for natural gas remains negative, and even a move above $2.87 will do little to dampen that. For now, though, support at $2.70 should hold and key support is $2.65. These are the 38 and 62 percent retracements of the move up from $2.565, so far. A close below $2.65 would shift near-term odds back in favor of a continued decline to challenge major support in the low $2.50’s.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

The outlook for April natural gas remains negative. Prices are still oscillating within the upward sloping bearish flag, but today’s failure to test the top of the flag’s range at $2.73 indicates the formation should attempt to break lower tomorrow.

The flag’s lower trend line is nominally $2.64, but $2.63 is key because it is the 62 percent retracement of the move up from $2.565. It is also in line with the $2.633 swing low. A close below $2.63 will confirm the flag has broken lower and open the way for another test of $2.52, the gateway to a much more bearish long-term outlook.

April Natural Gas - Daily
April Natural Gas – Daily

Resistance at $2.73 should hold. This is near the top of the flag, the 50-day moving average, and the 38 percent retracement of the decline from $2.983. A close above this would call for a larger upward correction that could ultimately reach $2.84.

The $2.84 threshold is most important because it is split between the 62 percent retracement and the 200-day moving average. It is doubtful that prices will overcome (or even reach) $2.84 without significant help from external factors.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

March natural gas finally settled above February’s 9’s $2.64 midpoint. The move up is most likely corrective of the decline from $3.259 and will continue to be a grind. However, natural gas should now challenge at least $2.71 and possibly higher before the decline ultimately continues.

The wave $2.53 – 2.662 – 2.565 met its $2.65 smaller than (0.618) target today. Waves that meet the smaller than target typically extend to the equal to (1.00) target, in this case, $2.71. This is an important objective because $2.71 is also in line with February 9’s open and is the completion point of the weekly morning star setup.

March Natural Gas - 0.035 Kase Bar
March Natural Gas – 0.035 Kase Bar

Settling above $2.71 would call for a larger upward correction and test of key near-term resistance at $2.81. This is the 38 percent retracement of the decline from $3.259 and the 50-day moving average. For the move down to continue in the near-term $2.81 must hold. A sustained close above this would not doom the move down, but rather dampen the odds for a continued decline to targets below the continuation chart’s crucial $2.522 swing low over the next few weeks.

March Natural Gas - Daily
March Natural Gas – Daily

Initial support is $2.61 and key support for the next few days is the $2.565 swing low. A move below this would wipe out the aforementioned wave up from $2.53 that projects to $2.71 and higher. This would also shift near-term odds back in favor of testing $2.51 and lower.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

The outlook for March natural gas remains negative but the formation of another daily star (in this case a hammer) and the small wave formation up from $2.538 indicate there is still a good chance for the upward correction to extend first. However, as stated over the past few days in our premium analysis and daily updates, unless prices settle above at least $2.65 and likely $2.70, to complete and then confirm the morning star setup, odds will continue to favor a test of key support at $2.52.

Initial support is $2.56, the smaller than (0.618) target of the wave $2.642 – 2.553 – 2.619. A move below this early tomorrow will open the way for $2.52, the intermediate (1.382) target. This is a key objective because $2.52 is in line with the continuation chart’s $2.522 swing low and is also the 62 percent retracement of the move up from $1.611. A sustained close below $2.52 will call for a much more negative long-term outlook.

March Natural Gas - Daily
March Natural Gas – Daily

Should the corrective move up extend and settle above $2.70 to confirm the morning star, odds will shift in favor of a larger upward correction to at least $2.76 and likely $2.81 before the decline continues. For now, given all factors, $2.81 is expected to hold because it is the 38 percent retracement of the decline from $3.259 and near the 50-day moving average. Settling above $2.81 would call the market’s bearish sentiment into question and the likelihood of a near-term decline to targets below $2.52.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

Outlook for Natural Gas

March natural gas fell below the $2.693 swing low, which nullifies the wave $2.532 – 3.035 – 2.693 and any potential that the move up from $2.532 would extend as a five-wave pattern. Today’s decline also wiped out the yesterday’s bullish hammer and intra-day bullish divergences. Therefore, as of this afternoon, there is no technical evidence that the move down will stall before reaching at least $2.65.

The $2.65 objective is the smaller than (0.618) target of the waves $3.259 – 2.837 – 2.92 and $2.92 – 2.695 – 2.782. Settling below $2.65 will open the way for $2.60 and more likely $2.56, which then connects to $2.50. The connection between these targets is of utmost importance. A move to $2.50 would take out the continuation chart’s $2.522 swing low and confirm a long-term bearish outlook.

March 2108 Natural Gas - Daily
March 2108 Natural Gas – Daily

If there is anything positive that can be said, the wave structure down from $3.259 still lacks depth. So far, all of the upward corrections have been less than 21 percent retracements. There is no guarantee that an upward correction will take place, but daily momentum is reaching oversold territory.

For now, look for initial resistance at $2.76 and $2.82. The higher of these should hold as it is the 21 percent retracement of the decline from $3.259 and the 62 percent retracement from $2.92. Key resistance is $2.87, the 50-day moving average. A close above this would indicate the move down has stalled and could be an early indicator of consolidation before the decline ultimately continues.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

The conviction of today’s natural gas price decline reflects the market’s disappointment with external factors. The confirmation of yesterday’s shooting star and bearish divergences do not indicate the move up is over, but significantly dampen the odds for March to rise to the levels that February achieved before its expiration.

The near-term outlook has shifted to negative and calls for a test of at least $2.91 tomorrow. This is near the 50 percent retracement of the move up from $2.532, the 62 percent retracement from $2.693, and the $2.905 and $2.907 swing lows. Settling below this will open the way for key support at $2.81, the 62 percent retracement of the rise from $2.532.

March 2018 Natural Gas - Daily
March 2018 Natural Gas – Daily

That said, although the decline from $3.259 has been aggressive, there is no well-developed wave structure yet. So far, the move down has retraced just over 38 percent of the move up from $2.532. Therefore, an upward correction of the decline from $2.532 should take place before prices fall below $2.91. Such a correction is expected to hold today’s $3.08 midpoint, which is also the 38 percent retracement of the decline from $3.259. Settling above $3.08 would call for a test of $3.14 and possibly higher before the end of the week.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

February natural gas finally broke through $3.32, the upper end of the confluence range around $3.29 +/- $0.03 discussed for the past few weeks. Although the day officially settled at $3.444, prices surged higher after the settlement to $3.628 and fulfilled the larger than (1.618) target of the wave $2.562 – 3.097 – 2.746 and the equal to (1.00) target of the wave $2.746 – 3.288 – 3.07. The confluence and importance of targets in this area make $3.628 a potential stalling point.

That said, it is difficult to call for the move up to stall after such a strong rally. Odds favor a continued rise and a move above $3.59 in early trading will open the way for $3.65 and higher.

Natural Gas $0.035 Kase Bars
Natural Gas $0.035 Kase Bars

Even so, bearish intra-day divergences, a PeakOut (overbought signal), and the small wave down from $3.628 indicate a pullback to $3.48 and possibly $3.42 will probably take place first. Support at $3.42 should hold. Key support is $3.35, today’s open-close midpoint and the 50 percent retracement of the move up from $3.07. A close below this would confirm the move up has stalled, at least temporarily, and call for a test of $3.25, today’s open and the 200-day moving average.

The bottom line is that trading may become extremely volatile over the next few days and even weeks as the market sorts through the extent of the effects of external factors (i.e. developing polar vortex in February). If the market’s outlook is going to remain bullish through the end of winter, it will have to hold support above at least $3.25 and likely $3.35.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil Forecast

March WTI crude oil confirmed bearish daily KasePO and KaseCD weak divergences. A weak divergence is one that forms when the confirming bar closes in the opposite direction of the signal, in this case, up. Weak divergences generally do not follow through as well as normal divergences but do warrant caution. In addition, yesterday’s midpoint held, leaving the daily dark cloud cover reversal pattern intact.

Tomorrow odds favor a continued decline to at least $63.2. This is the smaller than (0.618) target of the wave $64.83 – 63.25 – 64.14 and connects to $62.5 as the equal to (1.00) target. Settling below $62.5 would open the way for a larger pullback to $62.0 and even $61.6, the intermediate (1.382) and larger than (1.618) targets for the wave down from $64.83.

WTI Crude Oil Daily Chart
WTI Crude Oil Daily Chart

Should prices rise a bit higher first, look for $64.4 resistance to hold. A move above this would call for a new high of $65.1, a highly confluent and key threshold that connects to $66.3 and higher.

Natural Gas Forecast

February natural gas a crucial target at $3.29 when it rose to $3.288 today. This is an extremely important area for natural gas because $3.29 is in line with the equal to (1.00) projection of the wave $2.562 – 3.097 – 2.746, the 62 percent retracement of the decline from $3.772, and the 200-day moving average. A sustained close above $3.29 would confirm the market’s bullish sentiment, opening the way for a larger scale move up to $3.49 and possibly higher over the next few weeks.

That said, given the importance of $3.29 caution is warranted. This is a potential area in which the move up could stall and another sizable correction take place. In addition, the KaseCD, MACD, and Slow Stochastic are set up for bearish daily divergence.

Natural Gas Daily Chart
Natural Gas Daily Chart

If prices are going to overcome $3.29 this week $3.18 should hold. Key support for the next few days is $3.13, today’s open and the 62 percent retracement of the move up from $3.039. A close below this would not doom the move up but would open the way for a more substantial correction to challenge support at $3.08 and even $3.01.

This is a brief analysis for the next day or so. Our weekly Crude Oil and Natural Gas Commentaries and daily updates are much more detailed and thorough energy price forecasts that cover key futures contracts, calendar spreads, and ETFs. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil Forecast

January WTI crude oil settled below $56.94, the 62 percent retracement of the decline from $58.14 to $55.0 and the smaller than (0.618) projection of the wave $55.0 – 56.93 – 55.75. However, this afternoon’s late move above $56.94 indicates the move up should challenge the equal to (1.00) projection at $57.7 tomorrow. This is the last major target protecting against a new high. A close above $57.7 would call for $58.4 and possibly $58.9, the intermediate (1.382) and larger than (1.618) projections for the wave up from $55.0.

CLF18 Kase Bar Chart
CLF18 Kase Bar Chart

The move up will probably remain choppy and a good test of support will probably take place once $57.7 is met. For now, initial support is $56.4 and key support is $56.9, the 38 and 62 percent retracements of the move up from $55.0 to $57.22, respectively. Settling below $56.9 would shift near-term odds back in favor of $55.2, the smaller than target of the wave $58.14 – 55.0 – 57.22. This wave then connects to $54.1 as the equal to target.

Brent Crude Oil Forecast

Brent’s move up has been more hesitant than WTI’s this week and is still struggling to overcome the $62.92 swing high. However, today’s settle above the smaller than (0.618) projection of the wave $61.08 – 62.92 – 61.44 indicates Brent should rise to at least $63.3 tomorrow. This is the equal to (1.00) target and the 62 percent retracement of the decline from $64.65 to $61.08. The importance of targets at this level indicate there is a good chance that a pullback will take place once $63.3 is met.

Initial support is $62.0 and key support is $61.4. A close below $61.4 would take out the wave up from $61.08 that projects to target at $63.3 and higher and would shift odds back in favor of a continued decline toward $60.8 and lower.

Natural Gas Forecast

December natural gas hasn’t filled the November 6 gap up from $2.998 yet, but January, February, and March filled their respective gaps today. There is a tremendous amount of support around the bottom of each contract’s gap. Therefore, the move down may stall tomorrow. For December specifically, this area has become $2.99 +/- $0.02.

That said, aside from the confluence of targets around $2.99, the challenge right now is that there are no reversal patterns, only a few intraday divergence setups, that indicate the move down could stall. Therefore, until these signals are confirmed and initial resistance is overcome, near-term odds will favor a continued grind lower.

NGZ17 Kase Bar Chart
NGZ17 Kase Bar Chart

Tomorrow, look for a test of $2.99, a close below which would open the way for key lower support at $2.92. This is the next most confluent target below $2.99 and is most importantly the smaller than (0.618) target of the wave $3.353 – 2.847 – 3.231. The equal to target for this wave is $2.73, which means a close below $2.92 would put odds in favor of falling toward $2.73 during the next few weeks.

Should the bottom of December’s gap at $2.998 continue to hold on a closing basis, there is still a chance for a recovery. Initial resistance is $3.06 followed by $3.10. Key resistance is $3.15. This is in line with the $3.153 swing high, the 62 percent retracement of the decline from $3.231, and the 100-day moving average. At this point, December will have to settle above $3.153 to feel confident that this most recent move down is over.

This is a brief analysis for the next day or so. Our weekly Crude Oil and Natural Gas Commentaries and daily updates are much more detailed and thorough energy price forecasts that cover key futures contracts, calendar spreads, and ETFs. If you are interested in learning more, please sign up for a complimentary four-week trial.

Monday’s gap up from $2.998 is probably a bullish breakaway gap for December natural gas. This is a reversal pattern that takes place after a prolonged down move or consolidation period. Breakaway gaps are also a good sign that a new trend has possibly begun. This type of gap is not usually filled like common gaps. However, in rare cases the breakaway gap may be filled and the new upward trend remain intact.

Today’s settle above the 100-day moving average, 62 percent retracement of the decline from $3.353, and $3.17 confluence point was positive for the medium-term outlook. The move up should grind its way higher to $3.20 and possibly $3.24 over the next few days. However, there are a few warning signs that indicate caution is warranted.

Natural Gas Retracements and Moving Averages
Natural Gas Retracements and Moving Averages

The move up stalled at $3.19, the 38 percent retracement of the decline from $3.747, and still looks a bit exhausted. This afternoon’s late pullback, intraday bearish divergences, and overbought daily Stochastic indicate a larger pullback might take place soon.

With all factors considered, even if a larger pullback takes place support at $3.06 is expected to hold. This would only be a 38 percent retracement of the move up from $2.847, which is considered a “normal” correction. This may even be healthy for the prospects of a longer-term recovery as it could bring in a new wave of value seeking buyers. It would also setup a wave up from $2.847 with which more meaningful confluence points could be projected.

The key to sustaining a positive outlook is holding the bottom of Monday’s gap up from $2.998. Closing below this, which in this case is also near the 62 percent retracement of the move up from $2.847 to $3.190, would indicate the move up has failed again and shift near-term odds back in favor of continued decline.

This is a brief analysis for the next day or so. Our weekly Natural Gas Commentary and daily updates are much more detailed and thorough energy price forecasts that cover key natural gas futures contracts, calendar spreads, the UNG ETF, and several electricity contracts. If you are interested in learning more, please sign up for a complimentary four-week trial.