Natural Gas Short-Term Forecast – November 1, 2017

December natural gas fulfilled the equal to (1.00) target of the wave $3.353 – 3.013 – 3.198 when it fell to $2.847 today. Aside from a few brief declines to targets around $2.75, support around $2.86 has been troublesome on the continuation chart since late June. Technical factors indicate this may prove to be strong support for the December contract too.

It is much too soon to definitively state that the move down is over or even that a major correction is underway. However, the small move up from $2.847 formed a daily morning star and hammer reversal pattern setup that would be completed upon a close over Tuesday’s $2.942 midpoint. This is also near the larger than (1.618) projection of the small intraday wave $2.847 – 2.896 – 2.866. Also, the KasePO and Slow Stochastic are oversold and setup for bullish reversal patterns. Even the RSI is nearly oversold.

Natural Gas Daily Candlesticks
Natural Gas Daily Candlesticks

The challenge is that all of these positive factors are just setups at this point. Prices will need to settle above at least $2.95 to show that a meaningful correction is underway. Settling above $2.95 (more specifically, $2.945) would open the way for $2.99, the morning star and hammer’s confirmation point and the 38 percent retracement of the decline from $3.198 to $2.847.

If the move down is going to continue this week, a normal correction should hold $2.99. Otherwise, a close above this would call for a test of key near-term resistance at $3.05. This objective is split between the 62 percent retracement of the decline from $3.198 and the 38 percent retracement of the decline from $3.353. A close above $3.05 would not prove that the move down is over, but would provide a technical spark for a much more serious test of resistance that could ultimately lead to a recovery.

All of that said, the larger scale trend is still negative and longer-term odds ultimately favor a continued decline. Therefore, the anticipated move up to at least $2.95 and possibly higher will most likely be corrective. In addition, should prices fall below the $2.866, the wave up from $2.847 that projects to $2.95 and higher would be taken out. In this case, near-term odds will shift back in favor of $2.82 and ultimately $2.75, the next major objective below $2.86.

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.

November natural gas met support at $2.85, the intermediate (1.382) target of the wave $3.036 – 2.908 – 3.026. This wave is now in position to extend to its $2.81 larger than (1.618) target. This is an important objective because it is also the smaller than (0.618) target of the waves $3.214 – 2.827 – 3.036 and $3.561 – 2.886 – 3.214. Settling below $2.81 would open the way for a more negative near-term outlook.

Due to the confluence and importance of $2.81, once this target is met there is a reasonable chance another test of resistance will take place before prices fall much lower. Initial resistance is $2.89 and then $2.92. A normal correction should hold $2.92 because this is the 38 percent retracement of the decline from $3.036.

Natural Gas Daily Chart
Natural Gas Daily Chart

Key resistance for the near-term is $2.97, the 62 percent retracement. A close above this would call for another attempt at $3.02, the 50 percent retracement of the decline from $3.214 and the 50-day moving average.

At this point, aside from confluent support at $3.81, there is very little technical evidence that indicates the move down will end soon. This may change as withdraw season approaches and weather gets cooler. However, for now, odds have shifted back in favor of a continued decline to challenge the continuation charts $2.753 swing low.

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.

November natural gas overcame $2.94 but could not settle above this highly confluent threshold. The pullback from $2.962 formed a long upper shadow on the daily chart. Patterns like this that have formed during the past few weeks have been early warnings that the corrective moves up have stalled. This is probably the case again, so odds favor a test of at least $2.86 tomorrow. A close below $2.86 would open the way for $2.82 and more likely $2.79. The key objective is $2.75, which is in line with the continuation chart’s $2.753 swing low.

Natural Gas Kase Bars
Natural Gas $0.035 Kase Bars

That said, support at $2.88, the 62 percent retracement of the move up from $2.827, held this afternoon. Therefore, there is an outside chance that the move up will continue. A move above $2.93 in early trading would open the way for $2.97, which is now the smaller than (0.618) projection of the wave $2.827 – 2.962 – 2.884. This is also near the 38 percent retracement of the decline from $3.214 and the 62 percent retracement from $3.089. A close above $2.97 would call for $3.02, the equal to (1.00) projection, 50 percent retracement from $3.214, and 50-day moving average.

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.

November natural gas’ initial rise to $2.977 overcame Monday’s $2.967 midpoint. However, prices could not close above that level and the subsequent decline has already retraced 50 percent of the move up from $2.88. The candlestick’s long upper shadow indicates today’s move up was most likely a failed attempt to overcome resistance. Therefore, odds still favor a decline. A move below $2.90 early tomorrow would open the way for $2.85.

Natural Gas Daily Candlesticks
Natural Gas Daily Candlesticks

That said, a bullish daily KaseCD divergence and rising Stochastic %K-line indicate consolidation and possibly another attempt at $2.98 and higher might take place. $3.02 is most important for the near-term because it is split around the 38 percent retracement of the decline from $3.214, the 62 percent retracement from $3.089 and the 50-day moving average.

To confirm the move down is over (for now), prices must overcome the $3.089 swing high, which is also the 62 percent retracement of the decline from $3.214. This would, in turn, take out the wave $3.214 – 2.974 – 3.089 that projects to $2.85 and lower.

With all factors considered, the market still has a neutral-to-negative near-term outlook. Until external factors can support a sustained recovery, the decline will most likely continue to grind its way 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.

October natural gas’ settle below Monday’s $3.098 midpoint opens the way for a larger correction to at least $3.06. The move down is most likely corrective. However, for the move up to continue over the next few days $3.06 needs to hold. A close below this would not doom the move up but rather indicate that a deeper test of support and possible consolidation will begin to take place.

Natural Gas Wave Projections
Natural Gas Wave Projections

Initial resistance is $3.13, the 62 percent retracement of the decline from $3.166, so far. $3.17 is the key threshold for the near-term. A close above this would indicate the corrective pullback is over and that the move up will extend to $3.23. This is currently the most confluent objective making it another potential stalling point.

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 natural gas settled above $3.03 and fulfilled the $3.06 target. The next objective is $3.09, the equal to (1.00) target of the wave $2.88 – 3.088 – 2.885. The key objective is $3.12, the smaller than (0.618) target of the wave $2.799 – 3.042 – 2.88. This has been strong resistance all summer for October and the continuation chart, making it a decision point for a larger scale move up and sustained recovery.

Natural Gas Daily Chart
Natural Gas Daily Chart

A sustained close above $3.12 would open the way for $3.17 and $3.22. Above $3.12 the $3.22 objective is most important because it is the 50 percent retracement of the decline from $3.619. This is also a confluent projection for the aforementioned waves up from $2.799 and $2.88.

Daily momentum does not show any signs that the move up will stall. However, a few intraday charts are setup for divergence or are overbought. Therefore, given $3.12 has been such strong resistance a pullback might take place before it is overcome.

At this point, any move down will most likely be corrective. Tomorrow, support at $3.03 should hold. Key support is $2.96, which is the 50-day moving average and 62 percent retracement of the move up from $2.88 so far.

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.

Yesterday’s decline was a dose of reality that has set natural gas back into a state of uncertainty. With all factors considered, October natural gas will most likely settle back into a neutral trading range between nominally $2.91 and $3.04. This is about the same range prices oscillated within before last Thursday’s break high out of the bullish flag.

Natural Gas Kase Bar Chart
Natural Gas Kase Bar Chart

The wave formation down from $3.088 and a bearish daily KaseCD divergence call for $2.95, which then connects to $2.91. A close below $2.91 would call for $2.85, which in turn, would take out the crucial $2.88 swing low. A move below $2.88 would wipe out the wave up from $2.799 that projects to key upper resistance at $3.12.

That said, the 50-day moving average has held, so there is a modest chance the wave up from today’s $2.96 low could extend to $3.04 first. At this point we expect $3.04 to hold. However, a close above this would call for another attempt at $3.09 and possibly $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 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.

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.

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.