Natural Gas Forecast: Correction Forms Bearish Pennant

Late last week, September natural gas fulfilled important support near $2.51 when prices fell to $2.523. This is the 1.00 projection of the wave down from $2.99, the 50 percent retracement of the move up from $2.009, and the 62 percent retracement from $2.195. The confluence of targets around $2.51 indicate it is a potential turning point for natural gas.

Prices have risen from $2.523 to $2.648 so far, but the move has been extremely choppy and shallow. As a result, the move is most likely corrective. This is accentuated by the formation of a bearish pennant on the intra-day charts. Pennants are continuation patterns that indicate the prior trend should continue. In this case, the pennant favors a break lower. A close below $2.57 would confirm the break lower out of the pennant and open the way for another test of key support at $2.51.

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September natural gas has worked its way to important resistance at $2.64, but has not been able to close over this level yet. $2.64 is the 0.618 projection of the primary wave up from $2.523. A close over $2.64 would call for key resistance at $2.68. The $2.68 level is near the 38 percent retracement of the move down from $2.911 and is the midpoint of last Tuesday’s candlestick. A close over $2.68 would be a strong indication that prices will settle back into a trading range.

It is a tight call right now, but until there is a close over $2.68, odds favor a continued decline.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intraweek updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

September natural gas’s correction down from $2.99 is extending after breaking lower out of a coil formation. Tuesday’s close below $2.66, the 0.618 projection of the wave $2.99 – 2.591 – 2.911, opened the way for the 1.00 projection at $2.51. The $2.51 target is also the 50 percent retracement of the move up from $2.009 to $2.99 and the 62 percent retracement from $2.195. Unless there is a bearish shift in underlying fundamentals, $2.51 should hold.

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The KaseCD, a second derivative momentum indicator, is setup for bullish divergence on the daily chart. First resistance is $2.63. The key level for the near-term is $2.68. This is Tuesday’s midpoint and the 38 percent retracement of the decline from $2.911. A close over $2.68 would indicate September natural gas will most likely settle back into the recent trading range.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intraweek updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

September natural gas is trying to break higher out of the month long trading range. Two important boundaries have been established within the range. First between $2.71 and $2.84. Second between $2.66 and $2.96. Prices rose above $2.84 in early trading Wednesday, but closed just below at $2.839. Nonetheless, prices will likely push for at least $2.91 and possibly $2.96 tomorrow. A close over $2.96 would call for the bullish trend to extend to targets above $3.00. Given the strength of the moves up today and last Thursday, it looks as though prices will rise to new recovery highs soon.

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That said, a break higher out of the range in the near-term will likely hinge on tomorrow’s EIA Natural Gas Storage Report. A larger than expected build (some are looking for a draw in tomorrow’s report) could open the way for another test of $2.71. A close below this would then call for key support at $2.66.

With all technical factors considered, odds favor the move up tomorrow. September will need to close over $2.91 to keep the momentum it gained today and then close over $2.96 soon to open the way for targets above $3.00.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intraweek updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

August natural gas pushed to new highs Tuesday and early Wednesday before stalling at $2.974. Cooler than previously expected near-term temperature forecasts are reportedly the culprit for Wednesday’s pullback and settle at $2.863.

Longer-term, the outlook for natural gas is positive and is most likely forming a five-wave trend. The move up is due for a significant correction to form a potential Wave IV. Momentum is setup for bearish divergence. The Stochastic has also crept its way below the overbought threshold.

Charts show that August natural gas met a cluster of important wave projections at $2.974 Wednesday morning. The most significant was the 1.618 projection of the primary wave $1.99 – 2.494 – 2.157. It is rare for a primary wave such as this to extend beyond the 1.618 projection without a significant correction first.

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The pullback from $2.974 forms a daily shooting star. This reversal pattern would be completed upon a close below Tuesday’s $2.82 midpoint and confirmed upon a close below the $2.751 open. This would then open the way for $2.66, the 38 percent retracement from $2.157 to $2.974.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

July natural gas rose to a new high for 2016 when it overcame the January 8 swing high of $2.635. The move up extended to crucial resistance near $2.75 and stalled. $2.75 is a confluent target. Most importantly, it is the 1.382 projection of the primary wave $1.949 – 2.427 – 2.08.

Negative Factors

July’s decline on Wednesday is reportedly due to revised weather forecasts that call for cooler than previously expected temperatures over the next two weeks. In addition, some traders are allegedly concerned that factors behind the rapid price increase in recent weeks have been overhyped.

Momentum is setup for a bearish divergence on the KasePO and the Stochastic is in extreme overbought territory. There is also an evening star, which is a bearish candlestick reversal pattern. These factors indicate the correction that began late Wednesday afternoon should extend over the next few days.

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Look for $2.64 to be tested tomorrow (or even Wednesday afternoon). This is currently the 21 percent retracement from $2.101 to $2.786. This was strong resistance and will likely be resilient support. A close below $2.64 would open the way for $2.52, the 38 percent retracement from $2.101. A normal correction should hold $2.52. However, after such a strong move up, the correction might be larger than normal.

Positive Factors

The longer-term outlook for natural gas is positive. This downward correction will most likely form a complex Wave IV of a longer-term five-wave trend. However, should prices turn higher again tomorrow, look for resistance at $2.72 followed by $2.80 and most importantly $2.87. The latter is the 1.618 projection of the wave up from $1.949. A significant correction will almost certainly take place before $2.87 is overcome should the current correction stall before reaching at least $2.52.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Warm summer weather and a smaller than expected build reported last Thursday were allegedly the catalysts for the surge higher to $2.635. The recent string of smaller than expected builds has some analysts and traders speculating that the glut of gas in storage may shrink much faster than originally expected.

July natural gas challenged its $2.635 high made January 8, 2016 on June 13. So far, this important resistance level has held and prices have settled into a choppy range between $2.535 and $2.635. The market is most likely waiting for tomorrow’s EIA Natural Gas Storage Report before breaking higher or lower out of the range.

There is little doubt that the longer-term outlook for natural gas is positive. The sustained close over $2.57, the 1.00 projection for the wave $1.939 – 2.427 – 2.08, calls for $2.75 and possibly $2.87, the 1.382 and 1.618 projections, respectively. The move up is due for a correction, but a significant pullback might not take place until these targets are fulfilled. We doubt prices will rise above $2.87 without a major correction first.

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That said, $2.635 has held and the KasePO PeakOut and an overbought Stochastic indicate a deeper pullback might take place first. There is also a double top (some might argue a triple top) at $2.635. Tomorrow’s EIA number, if bearish, could lead to a break lower out of the range.

First support is $2.535, and a close below this would confirm the double top and call for $2.44. The $2.44 level is expected to hold. A close below this would indicate the market is reassessing the validity and strength of the recent move up.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas prices have risen sharply over the past seven days. July rose to $2.501 in early trading Wednesday, overcoming the continuation chart’s $2.495 high for 2016. Reports indicate the surge has been due to forecasts for higher temperatures in coming weeks. However, some think the move up may be too aggressive considering storage levels are still 35 percent higher than the five-year average for this time of year.

Technical factors have been positive too. Last week’s close over key resistance at $2.38 cleared the way for at least $2.57 and possibly higher during the course of summer months. Overall, the outlook is positive for the longer-term.

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That said, the move up may have been too much too fast. The KasePO and Stochastic are in overbought territory and the move up is due for a correction soon. In addition, the market will need to close over the perpetual’s $2.495 swing high to definitively overcome this important resistance level.

Odds ultimately favor at least $2.57, especially upon a close over $2.495. However, today’s evening star setup and failure to close over $2.495 indicate a correction to $2.42 and possibly $2.35 should take place before $2.57 is overcome.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Prompt month natural gas futures have risen just over 20 percent after the June contract’s expiration last Thursday. Reports indicate traders are expecting increased demand for the fuel due to warmer than normal summer weather in coming weeks. Technical factors have also turned positive and call for rising prices to challenge and likely overcome the 2016 highs made in early January.

The technicals turned positive last week, ahead of the June contract’s expiration, when July natural gas held crucial support at $2.13 on a closing basis. This was the 62 percent retracement of the move up from July’s $1.939 contract low to $2.427. The spread between June and July had weighed on July, but once June expired, July was primed to rise to challenge key resistance levels this week.

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Tuesday’s close over $2.22 opened the way for key resistance at $2.38. This is the 0.618 projection for the wave $1.939 – 2.427 – 2.08. Waves that meet the 0.618 target normally (75-80 percent of the time) rise to at least the 1.00 projection. Therefore, now that $2.38 has been met, odds ultimately favor at least $2.57, the 1.00 projection.

That said, the confluence of targets near $2.38 indicates it may hold, at least initially. Any move down at this point is likely corrective of the move up, and a pullback should hold $2.27 and no lower than $2.20. Ultimately, we expect July to close over $2.38 and rise toward $2.57 within the next few weeks.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

The spread between the June and July contracts ahead of June’s expiration on Thursday has weighed on the front of the market. However, July natural gas challenged crucial support at $2.13 Wednesday and held this level on a closing basis while June stalled again near key support at $1.95. The longer-term is beginning to look more positive for natural gas, and once June expires, July is poised to rise toward key resistance at $2.31.

Wednesday’s close over $2.17, the midpoint of Tuesday, was positive for the near-term. Tomorrow, look for July to test $2.21. A close over this would then call for $2.25 and $2.31. Overcoming $2.31 would open the way for an extended move higher.

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Trading will likely remain choppy for the next few days, especially ahead of the holiday weekend, and $2.13 is still crucial support. It is in line with projections for the waves down from $2.427 and $2.327. It is also near the 62 percent retracement of the move up from $1.939 to $2.427 and is the close of May 18. A close below $2.13 would call for $2.08 and possibly $2.00. July might test a bit lower, but we still do not see evidence that July will fall lower than $2.00.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas continues to send mixed signals on a day-to-day basis. However, that is pretty typical for this time of year during the shoulder months ahead of summer. Natural gas is trying to gauge the prospects of a recovery or a continued decline over the course of the longer-term, but it needs to gather more information first. With all current factors considered, it is looking like natural gas is settling into another trading range, though the boundaries of the range are still being determined.

For now, odds still favor a decline. June natural gas met the 0.618 projection for the wave $2.304 – 2.042 – 2.195 at $2.026 on Monday. Waves that meet the 0.618 projection typically extend to the 1.00 projection, in this case $1.93. Therefore, unless $2.195 is overcome, odds ultimately favor $1.93.

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That said, the wave up from $2.026, aided by today’s close over $2.14, shows potential to extend to its 1.618 projection of $2.19. This is near the $2.195 swing high and the 62 percent retracement of the decline from $2.304 to $2.026. A move above $2.195 would take out the wave down from $2.304 that projects to $1.93 and lower, and in turn, shift odds in favor of $2.28 and higher.

First support is $2.06, the 0.618 projection of the wave $2.195 – 2.026 – 2.16. A close below this would take out the wave up from $2.026 and the near-term potential of overcoming $2.195. This would also open the way for another attempt at $2.00 and lower.

The key over the next few days will be either a move above $2.195 or below $2.061. As stated, odds favor the decline, but it is a very tight call right now.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.