Natural Gas Forecast: Pullback Stalls at $2.81

According to some pundits, natural gas’s recent move up is due to improved balancing of supply and demand. Government data shows the degree to which inventories are up this year relative to the five-year average has continued to shrink. It has been a hot summer, and demand has remained relatively strong.

That said, production has done well to keep pace with demand during summer, and there is a limit to the amount of gas that can be stored. Many analysts project that injection season will end at or near record levels again this year. Therefore, the market should be well supplied ahead of winter.

Fundamental factors will rule the longer-term. However, there are still many questions that need to be answered over the next six to eight weeks before the market can realistically determine a longer-term direction. For the near-term, a trading range between nominally $2.55 and $2.95 is still the most logical conclusion for now. Keep in mind, for nearly nine months of 2015 the prompt month futures contract traded in this range.

From a technical standpoint, October natural gas was poised to rise to $3.04 after overcoming resistance at $2.86 the $2.947 swing high late last week. The pullback from $2.949 is likely corrective and stalled near $2.81 on Wednesday. This is the 38 percent retracement of the move up from $2.58 and the 1.618 projection of the wave down from $2.949.

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If the move up is going to extend to new highs in the near term, $2.81 needs to hold. In addition, October will need to finally close over $2.95. Otherwise, a close below $2.81 would signal trading range and call for confluent support at $2.71 to be challenged.

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.

On Friday, WTI crude oil prices pulled back sharply after the U.S. Federal Reserve signaled short-term interest rates may be raised in coming weeks. The U.S. dollar rose, and oil prices fell. The week ended on a negative note, and the corrective pullback extended again on Monday.

Aside from the stronger dollar, media outlets also indicate traders and analysts are weighing the potential consequences of a still oversupplied market against the prospects of a production freeze. Last week, DOE data showed U.S. inventories of oil and refined products have risen to a record high. However, Iran has reportedly shown interest in joining talks with other major producers regarding measures to freeze production in a unified effort to stabilize prices.

The longer-term technical outlook for oil remains positive. However, near-term factors indicate the corrective decline should continue to extend first. October WTI met the 0.618 projection of the wave $49.36 – 46.42 – 48.46 on Monday. Nearly 80 percent of waves that meet the 0.618 projection extend to the 1.00 projection. Therefore, odds favor $45.5 before the move up continues.

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The $45.5 target is important because it is near the 38 percent retracement of the move up from $39.96 to $49.36. A “normal” correction should hold $45.5. A close below $45.5 would open the way for an extended correction and potential trading range in the mid-to-upper $40s.

The move down will remain choppy, but over the next few days look for resistance at $47.9 to hold. Key resistance is $48.7. A move to $48.7 would take out the wave down from $49.36 that projects to $45.5 and lower.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek 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.

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 WTI crude oil’s settle above $44.4 Friday and $45.7 Monday has opened the way for the move up to continue. The Stochastic has risen into overbought territory, but there is no technical evidence the move will stall.

The next targets are $46.3, $47.0, and $47.9. The $47.9 level is a crucial confluence point split between the 62 percent retracement of the decline from $52.73 and the 1.618 projection of the wave up from $39.19. A sustained close over $47.9 would confirm the market is moving toward bullish territory again.

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A pullback may take place soon. However, support at $45.3 should hold. This is near Monday’s midpoint. Key support for the near-term is $44.7. A close below this would call for an extended downward correction to at least $44.1 and possibly $43.5.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek 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.

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 WTI crude oil’s correction up from $39.19 gained ground on Monday when it settled above $42.8. Media outlets indicate the rise was due renewed hopes that OPEC members might consider freezing production levels. OPEC announced on Monday that they would hold informal talks at an energy conference in September.

That said, from a technical perspective, the move down was due for a correction. September WTI briefly moved into bearish territory last week when it settled below $40.4. However, a highly confluent and important $39.2 target held when the $39.19 swing low was made. The Stochastic has since risen out of oversold territory, and several intraday charts confirmed bullish momentum divergences.

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Friday’s hanging man candlestick pattern was negative by Monday’s close over $42.8. This opens the way for $44.4. This is the 38 percent retracement of the decline from $52.73 to $39.19 and an important decision point for the near-term. If the move down is going to continue within the next few weeks, $44.4 should hold. However, a close over $44.4 would call for an extended correction and could be an early indication that another long-term bottom has been made.

As the move up extends over the next few days, look for near-term support at $42.5, $41.8, and $40.8. The $42.5 level will probably be tested early Tuesday, but should hold. This is near Monday’s midpoint. Key support is $40.8 because it is the 62 percent retracement of the move up from $39.19. A close below this would shift odds in favor of testing $39.19 again.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek 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.

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 stalled at $2.998 late last week. So far, August has pulled back to $2.697. The $2.998 swing high was in line with the 1.618 projection of the wave $1.99 – 2.494 – 2.157. From a technical standpoint, the move up was due for a correction. Momentum was exhausted and the bearish KasePO divergence indicates the correction that began Tuesday should now challenge major support levels.

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Longer-term, the outlook for natural gas is positive. The move up looks to be forming five-waves. Wave III of the five-wave pattern was completed at $2.998. The corrective Wave IV is now underway. A normal correction should hold $2.61, the 38 percent retracement from $1.99 to $2.998. The $2.61 level was also strong support between June 10 and 17.

A close below $2.61 would open the way for a more significant correction. However, the longer-term bullish outlook would not be called into question unless there is a sustained close below $2.38. This is the 62 percent retracement of the move up from $1.99. Such a move is highly doubtful without a significant bearish shift in underlying fundamentals.

Wednesday’s hammer formation indicates the move down may halt to a grind lower. A test of Tuesday’s $2.84 midpoint will likely take place on Thursday. Key resistance is $2.88. This is the 62 percent retracement from $2.998 to $2.697. While $2.88 holds, odds will continue to favor a deeper correction.

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.

The U.K.’s vote for Brexit came as a shock to many investors and traders around the world. Equity markets have tumbled and crude oil followed suit as the U.S. dollar has risen substantially. Some pundits think the downturn in oil has been overdue, and warn that the market is still oversupplied and could slip further in coming weeks and months. Others hold the recovery will continue and that the decline is likely an overreaction to Brexit.

It is clear that sentiment is mixed. However, charts tell a clearer story. The long-term bias is positive, and ultimately odds still favor the move up. However, the downward correction is poised to continue for the near-term.

Negative Factors

August WTI met confluent support near $46.0 on Monday. This was in line the 0.618 projection of the wave $50.54 – 46.7 – 48.45 and 1.382 projection of the wave $48.45 – 46.92 – 47.96. Near-term odds favor a decline to at least $44.7, the 1.00 projections of the waves $52.28 – 46.4 – 50.54 and $50.54 – 46.7 – 48.45. This is a very important target and decision point for WTI. A close below $44.7 would open the way for targets in the low $40s. It is at those targets that the market will need to decide whether the move up will continue or a long-term bearish outlook would be adopted again.

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Positive Factors

The upward correction that began late Monday afternoon may extend to $46.8 and even $47.5 in early trading Tuesday. However, $47.5 should hold. A close over $47.5 would call for a test of key resistance levels above $50.0, that if overcome, would indicate the downward correction is over.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is 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.