As expected in the weekly Commentary, prompt month natural gas prices have been trading in an erratic manner this week. Crucial resistance at $1.95 has held on a closing basis so far, but today’s move up invalidates yesterday’s bearish dark cloud cover. Based on this and the waves up from $1.521, $1.555, and $1.774, natural gas should make a push for at least $1.97 and likely $2.04 before the end of the week. Closing above $2.04 will call for key upper resistance at $2.10.
The challenge is that for the move up to be sustained fundamental data will have to reflect a strong bullish change in supply and demand. Technical factors can push prices to $2.04 and maybe $2.10, but anything higher than that, or a sustained move above $2.00, will have to be backed by bullish fundamentals. This means that there is still quite a bit of downside risk.
Should natural gas fall below $1.85 before overcoming $1.97 look for another attempt at $1.80 and possibly $1.75. The $1.75 level is the 62 percent retracement of the move up from $1.521. Therefore, a close below $1.75 would shift odds in favor of $1.68 and then a move back toward the $1.555 and $1.521 swing lows.
With all factors considered, natural gas prices should rise a bit higher during the next few days. But the move up will probably be short-lived and another major test of support is likely without help from external factors. Therefore, for the bigger picture, the most probable scenario is a wide trading range, the boundaries of which are still be defined.
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