Natural Gas Forecast: Oscillating Within Bullish Flag

October natural gas looks to be well balanced as it continues to oscillate in a range between nominally $2.88 and $3.03. The range forms a bullish flag after holding support at $2.88 on Monday. However, today’s early move up stalled before it could overcome the $2.998 swing high and challenge the flag’s $3.03 upper trend line.

Flags are generally reliable continuation patterns. However, in this case, we believe there is a high probability that $3.03 will hold and that ultimately prices will break lower out of the pattern. This is because the pattern has been very wide relative to the prior move up from $2.799 to $3.042. In addition, prices have not been able to overcome the psychologically important $3.00 level for the past few days.

NGV17 Kase Bar Chart
NGV17 $0.035 Kase Bar Chart

Because the wave $2.88 – 2.998 – 2.91 met its $2.99 smaller than (0.618) projection there is still a reasonable chance for a test of $3.03. However, a move below the $2.91 swing low would wipe out that wave and significantly dampen the odds for $3.03 and higher. Therefore, at this point, a move above either $2.99 or below $2.91 should give us a good idea of the direction for the next few days.

The market remains tight and may continue to oscillate in a narrowing range, but with all factors considered, tomorrow look for a test of $2.90 and possibly $2.87. A close below $2.87 would confirm a break lower out of the flag, opening the way for $2.84 and lower.

Should the $2.91 swing low hold and prices overcome $2.99, near-term odds will shift back in favor of challenging $3.03. A close above $3.03 would confirm a break higher out of the flag and call for $3.08 and ultimately $3.12.

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.

October WTI crude oil continues to work its way toward crucial support at $45.6. Most importantly, this is the 62 percent retracement of the move up from $42.52 to $50.51. It is also a confluent projection for the waves down from $48.91, $48.5, and $48.2. A move below initial support at $46.1 will clear the way for $45.6.

CLV17 Daily Chart
CLV17 Daily Chart

The confluence of projections at $45.6 makes it a potential stalling point. However, today’s $46.44 settle was below the $46.5 smaller than (0.618) target of the larger scale wave $50.51 – 46.62 – 48.91. Therefore, this wave should ultimately extend to its $45.0 equal to (1.00) target. An upward correction will likely take place once $45.6 is met, but while the $48.91 swing low holds, odds will favor an eventual decline to $45.0.

That said, unstable external factors have crude and products on edge. Therefore, the move up from $45.76 this afternoon was likely short covering. Resistance at $46.9 should hold tomorrow. A move above this would call for a test of Monday’s $47.2 midpoint. Even so, unless WTI settles above $47.8, which splits the difference between Monday’s open and the 62 percent retracement of the decline from $48.91, the near-term outlook will remain negative.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI crude oil fell sharply last Thursday after OPEC and other major producers announced an extension to production cuts through March 2018. This was expected by most, and according to media, the decline was due to disappointment that production cuts were not deeper, which many had hoped for.

U.S. shale production remains a concern, though stockpiles fell for a seventh straight week, a fact that many have seemed to overlook. In addition, some are reportedly wondering what OPEC’s plan for an exit strategy to the production cuts will be without flooding the market with supply again.

For now, the extension of the OPEC cuts has become a game of “wait-and-see”. They will undoubtedly have a longer-term impact on prices, but at this point, it is hard to tell how significant the impact will be.

Most technical factors are negative, though it is still a tight call. July WTI made up some ground since falling late last week. However, the formation of a head and shoulders pattern is negative for the near-term outlook. The pattern’s neckline is $48.1, a close below which would open the way for the move down to continue toward its $44.65 target.

July 2017 WTI Crude Oil - 35-Cent Kase Bar Chart
July 2017 WTI Crude Oil – 35-Cent Kase Bar Chart

The connection to $48.1 is made through $49.1 and $48.6, the 0.618 and 1.00 projections of the wave $50.28 – 49.03 – 49.83. Tomorrow, we expect prices to test $49.1 and $48.6. A close below the lower objective would call for $48.1, the 1.382 projection, which is also near the 0.618 projection of the larger wave, $52.0 – 48.18 – 50.28.

That said, should prices rise above $50.3, near-term odds would shift in favor of $51.1 and possibly higher. The $50.3 level is the top of the head and shoulder’s right shoulder and the 0.618 projection of the wave $48.18 – 50.28 – 49.03. The 1.00 projection is $51.1. Therefore, a close above $50.3 would significantly damage the head and shoulders formation and the likelihood of a break below its $48.1 neckline.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI crude oil continues to rise ahead of May 25’s OPEC meeting. Market participants are optimistic that OPEC will extend production cuts through the end of 2017. Many hope this will help to ease the global supply glut. U.S. production remains a concern, but for now, oil prices are poised to rise.

Most technical factors are positive. In recent days, July WTI sustained settles above the 62 percent retracement of the decline from $54.45 to $44.13. This is a strong indication that the recovery from $44.13 will continue.

July 2017 WTI Crude Oil - 35-Cent Kase Bar Chart
July 2017 WTI – 35-Cent Kase Bar Chart

Today’s break higher out of another intraday bullish flag and settle above Monday’s $51.43 high opens the way for $52.5. As shown in the chart above, this is a highly confluent wave projection that sits just above the 78 percent retracement of the decline from $54.45 to $44.13. The confluence of wave projections at $52.5 make it a potential stalling point.

Momentum on the KaseCD and KasePO is rising. The KasePO is setup for bearish momentum divergence, a reversal signal that forms when higher swing highs in price and lower swing highs in momentum are made. To confirm the divergence signal, a swing high in price and momentum must form before momentum rises to a new high.

The Kase Easy Entry System (KEES) also triggered a second class buy signal (light blue L) on the 35-cent Kase Bar chart today. A second-class buy signal indicates the majority of momentum indicators KEES examines are positive but that momentum on the synthetic longer bar length is negative. Traders using Kase StatWare may have taken a smaller position and placed a tighter trailing stop. Stops may be widened once the KEES permissions shift to first class (dark blue dots).

For the near-term, the $50.57 swing low is important support. A move below this would likely trigger the bearish KasePO divergence and open the way for a correction to $50.0 and possibly $49.6.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

The long-term outlook for WTI crude oil remains negative and it is too soon to state that a bottom has been made. However, last Friday, June WTI met major support at $43.76, the 1.00 projection of the wave $57.95 – 47.58 – 54.14 (exact projection was $43.77). This was also in the realm of the August 2016 swing low of $44.56 and the 62 percent retracement of the move up from $36.18 to $57.95 ($44.5). The confluence of support between $43.77 and $44.56 and the fact that this range has held on a closing basis favors a larger upward correction before the decline continues.

In addition to meeting support at $43.76, June WTI confirmed daily bullish divergences on the KaseCD and Stochastic and a bullish KasePO PeakOut (oversold signal). These signals call for the upward correction to extend. Most importantly, over the past two days, the pullback from $46.98 formed a bullish intraday flag, shown below on the $0.35 Kase Bar chart.

June 2017 WTI Crude Oil - $0.35 Kase Bar Chart
June 2017 WTI Crude Oil – $0.35 Kase Bar Chart

For now, according to Kase’s price forecasting model, odds are 65 percent for a break higher out of the flag. These odds will increase as prices rise toward the upper trendline of the flag at $46.6.

Important resistance at $47.6 should be challenged upon a break higher out of the flag. This is the confluence point between the 38 percent retracement of the decline from $54.14 to $43.76 and the 0.618 projection of the wave $43.76 – 46.98 – 45.53.

That said, there are some danger signs that indicate the flag, and other bullish technical factors, are on the teetering edge of failing.

The key to a break higher out of the flag and extended upward correction is holding support at $45.5. This is in line with the today’s $45.53 swing low and the flag’s lower trendline. A close below this would call for a test of $45.0, the 62 percent retracement of the move up from $43.76 to $46.98. Settling below $45.0 would shift near-term odds back in favor of testing the $43.76 low again.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

On Tuesday, crude oil prices continued to slip lower. Technical factors indicate June WTI’s corrective decline from $54.14 is poised to extend to at least $52.2. This is the 1.618 projection of the wave $54.14 – 53.14 – 53.8 and the 50-day moving average. A close below $52.2 would call for key near-term support at $51.6. This target is crucial because it’s the 38 percent retracement of the move from $47.58 to $54.14 and the 200-day moving average.

June 2017 WTI Crude Oil - $0.35 Kase Bar Chart
June 2017 WTI Crude Oil – $0.35 Kase Bar Chart

That said, a bullish KaseCD divergence on the $0.35 Kase Bar chart indicates another test of $52.2 and possibly $53.6 might take place first. Resistance at $53.6 is expected to hold. A close over this would call for $54.3. However, a sustained close over $54.0 is the key to a continued rise. This is the 62 percent retracement of the decline from $57.95 to $47.58.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

As of December 9, natural gas had risen for the fourth straight week to the highest level in two years. Reports indicate the surge was due to colder than average temperatures in recent weeks. However, on December 12, January natural gas gapped down after the move up stalled at $3.777. The gap may be an early indication the move up is exhausted, though we doubt this is the case.

From a technical and fundamental standpoint, it is much too early to definitively state that the move up is over. Forecasts for persistent cold in coming weeks will most likely continue to support prices and the larger scale wave formations for January, February, and March all call for prices to ultimately rise to at least $3.90.

That said, this does not mean that corrections will not take place. Monday’s gap down was most likely the market coming back to reality a bit. The move up has been hard and fast, and if it is going to be sustained for the longer-term, corrections are necessary.

Since gapping down on Monday, prices have slowly inched lower, indicating the decline is most likely corrective. So far, support at $3.47 has held on a closing basis. However, near-term odds favor at least $3.41. This is the 0.618 projection of the primary wave down from $3.777. A close below $3.41 would open the way for confluent support at $3.36 and then $3.30. Unless there is a bearish shift in underlying factors, we expect $3.30 to hold.

January Natural Gas - $0.035 Kase Bar Chart

Initial resistance is $3.57. If prices are going to fall below $3.41, $3.57 will most likely hold. The most important resistance is $3.66. This is the top of Monday’s gap and near the 62 percent retracement of the decline from $3.777. A close over $3.66 would be a strong indication that the downward correction is complete and that the move up is going to continue its way toward $3.90.

This is a brief natural gas forecast for the next day or so (in this case, a bit longer). Our weekly Natural Gas Commentary and intra-week 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.

Early Monday, crude oil prices were bolstered again after an announcement made by non-OPEC producers to cut 558,000 barrels per day. This comes after a commitment by OPEC to cut 1.2 million barrels per day. Reports indicate that such cuts will help to rebalance supply and demand by the first half of 2017. However, many market insiders remain skeptical that OPEC and other major producers such as Russia will stick to their agreements and quotas in coming months.

From a technical standpoint, January WTI gapped higher on Monday and met the 0.618 projection of the wave $34.55 – 53.72 – 42.43 at $54.51. This is an extremely important target. Waves that meet the 0.618 projection generally extend to their 1.00 projection, in this case, $61.6. It would likely take weeks, if not months, to reach $61.6. However, upon a sustained close over $54.5, the outlook for WTI would become much more bullish.

WTI Crude Oil

Due to the importance of $54.5, a correction is expected before prices rise much higher. So far, prices have fallen to $52.18 and formed a shooting star pattern on the daily chart. This is negative for the near-term and indicates the gap from $51.66 will most likely be filled within the next day or so.

A close below $51.66 would call for $50.1. This was resilient support last week and is the midpoint of December 1. For now, it looks as though prices will try and hold above $50.1 and will likely settle into a trading range between $50.1 and $54.5.

A close below $50.1 would open the way for $48.7 and $47.4. The lower of these two targets is most important support because it is the 62 percent retracement of the move up from $42.95 to $54.51. A sustained close below $47.4 is doubtful in the near-term but would be a strong indication that the move up is over.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Crude Oil rose substantially last week after OPEC agreed to cut output by 1.2 million barrels per day. The week posted the largest percentage gain since 2009 and many market participants reportedly expect the move up to continue.

However, others remain skeptical that OPEC members will comply with production quotas. Members have been known to cheat quotas in the past per media sources. In addition, pundits say higher prices would likely encourage more shale production in the U.S., which would ultimately offset OPEC cuts.

Most long-term technical factors are positive. However, WTI is starting to show signs of weakness for the near-term. January WTI’s move up stalled at $52.42 before prices could overcome the mid-October double top at $52.7. To reach the next target at $53.6 soon, January must overcome $52.7 early this week.

WTI Crude Oil

That said, the KaseCD momentum indicator is set up for bearish divergence and several momentum indicators confirmed bearish divergences on intra-day charts. Therefore, the correction from $52.42 will most likely extend to last Thursday’s $50.1 midpoint first. A close below $50.1 would then call for $49.5, which is the 38 percent retracement of the move up from $44.82 to $52.42.

Key support for the near-term is $49.1. A close below this would be a strong indication that without more help from external factors, the move up is over, for now.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Natural gas’s recovery from recent lows is reportedly due to forecasts for cooler temperatures that could bring more demand in coming weeks. In addition, prices were bolstered on Wednesday due to a surprise two Bcf withdrawal reported in the EIA Natural Gas Storage Report. However, some analysts have cited record storage levels could still ultimately be bearish for the longer-term.

On Monday, December natural gas formed a potential bullish breakaway gap from $2.852. Bullish breakaway gaps occur when a move down becomes exhausted and prices break higher out of a recent trading range. This is a reversal pattern that could indicate the move down is over, for now.

December Natural Gas

In addition, the 200-day moving average was overcome on Wednesday when December settled at $3.026. This is also bullish and indicates, at a minimum, that an extended upward correction to challenge recent swing highs is likely underway.

The wave formation up from $2.546 met important resistance at $3.062 on Wednesday. A small correction might take place first, but the wave formations are poised for $3.17. This is key resistance because it is in line with the $3.163 swing high, which is also crucial on the continuation chart. It is also the 62 percent retracement of the decline from $3.556 to $2.546. A move above $3.17 ($3.31 for January) is doubtful without help from external factors (i.e. cold weather) but would open the way for new 2016 highs.

That said, December may still try to fill the gap from $2.852. Look for initial support at $2.95 and key support at $2.85. The $2.85 level is not only in line with the gap, but also the 38 percent retracement of the move up from $2.546.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intra-week 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.