Midweek Natural Gas Forecast – July 22, 2015

Natural gas is idling in neutral again and is struggling to overcome key resistance levels. We are still negative for the longer-term, but the near term outlook is looking slightly positive.

The small move up is confirmed by long KaseX signals (green diamonds) on the $0.035 Kase Bar chart. In addition, Wednesday’s close over $2.895, the 1.00 projection for the wave up from $2.785, has opened the way for its 1.618 projection near $2.96. The $2.96 target is crucial because it is the 0.618 projection for the wave up from $2.644. A close over $2.96 would call for an extended correction to targets above $3.00.

natraul gas

Other than the quick move up from $2.644, the recent move up has lacked conviction. A daily evening star setup and hanging man indicates traders are still not quite sure if the market is ready to make the push higher. Tuesday’s $2.84 open is first support, and a close below this would call for another test of the $2.785 swing low.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. 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.

August natural gas is attempting to rally above $3.00 after stalling at $2.644 last Thursday. The surge over the last week may be a desperate attempt to push prices to targets above $3.00 before summer’s end, and is being driven by speculation of above normal temperatures through the end of this month and into August.

The near-term outlook took a positive turn Wednesday when prices closed above $2.884, the 0.618 projection of the wave $2.588 – 2.977- 2.644. This clears the way for a rally to the 1.00 projection of $3.03. This is a potential stalling point for the upward correction. A close over $3.03 would call for the $3.20 confluence point with intermediate resistance at $3.11.

natural gas

Caution is warranted though because it is a bit early to get overly exuberant about a bullish recovery. The balance of bullish and bearish factors is razor thin and shifts day-to-day. The move up is almost certainly corrective of the longer-term decline. Do not be surprised to see prices pull back and settle below $2.82 on Thursday should there be a disappointing EIA storage report. This, in turn, would call for $2.75 and lower.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. 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.

After the 4th of July weekend the energy markets, unlike the weather across most of the U.S., heated up. The lack of warm summer weather in key areas of the county has given way to lower prices for natural gas. August natural gas futures finally closed below $2.73 on Tuesday and Wednesday. The move has been quiet relative to the noise being made by crude oil, but the break lower indicates prices should continue to decline. That said, the bullish KaseCD divergence and KasePO PeakOut (oversold signal) on the $0.035 Kase Bar chart indicate the decline will be a grind.

natural gas prices

The wave $2.977 – 2.733 – 2.885 took out its 0.618 projection at $2.73, therefore odds favor at least $2.64, its 1.00 projection. This is a highly confluent and important target that protects the $2.588 swing low. We expect to see a bounce from $2.64 given its importance. A close below $2.64 would call for $2.55 and $2.50.

The 38 percent retracement from $2.885 to $2.676 is $2.76. Key near-term resistance is $2.81, the 62 percent retracement. Both levels are in line with the two previous intraday swing highs of $2.756 and $2.80. A close over $2.81 is unlikely unless tomorrow’s Energy Information Agency (EIA) report is extremely bullish.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. 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.

Markets are rarely more balanced that what we have experienced for natural gas over the past few weeks. After August failed to overcome $2.95 it stalled at $2.73, and is now in a mini-range between $2.73 and $2.87. Considering this week marked the end of the month and quarter, and is shortened due to the 4th of July holiday, a breakout will likely be delayed until next week.

The market is waiting for factors like summer weather and/or supply/demand issues to give us a breaking. The longer it delays the move up though, the more prices will erode away until it is too late to make a meaningful push higher.

It is still a bit early for the market to give up on a summer rally, but based on many technical factors we favor a break lower out of the mini-range between $2.73 and $2.87. This morning’s failed attempt to overcome $2.87, bearish KaseCD divergence and first short signal confirm our call. This would open the way for a confluent $2.64 target.

natural gas prices

Should prices close over $2.87 look for another test of $2.95, which is the key threshold for a push to levels above $3.00 and a summer rally.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

Day-to-day speculation regarding summer weather forecasts continue to dominate short-term natural gas prices. The lack of clarity has caused natural gas to settle into a range between $2.55 and $2.95 after failing to close over the upper end of the range last week.

Technical factors show that prices are due for a test of the lower end of the range where contract lows will be challenged. Because the wave down from $2.955 (shown in red) met its 0.618 projection we expect to see at least its 1.00 projection of $2.62. This is also the 0.618 for the wave down from $3.105 (shown in blue).

natural gas prices

That said, it is still early for support to give way to the longer-term bearish trend, so the decline will likely be a grind. Support at $2.71 is holding strong, but a disappointing EIA storage report tomorrow would clear the way for $2.62. This is a confluence point just like $2.71, so $2.62 should hold.

Key resistance is $2.83 because it is in line with the $2.837 swing high. Overcoming $2.837 will take out the wave down from $2.955 and negate the near-term potential for $2.62.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

Last week we discussed the chart below and the importance of $2.92 as the 0.618 projection of the wave up from $2.54 (not shown) and the 62 percent retracement from $3.15. The chart is being shown again, with a few updates, because not much has changed over the past week.

Natural Gas Projections

The crucial $2.92 level has been tested four times now, including this morning’s brief excursion to $2.955. Because prices failed to close over $2.92 again, we expect to see another oscillation lower to challenge support at $2.80. This is the 38 percent retracement of the move up and is near Monday’s $2.83 midpoint and Tuesday’s $2.831 low.

The bearish KaseCD and KasePO divergence and the DevStop2 hit on the $0.035 Kase Bar chart support the move lower and test of $2.80 tomorrow.

Natural Gas Divergences

Tomorrow’s EIA may be the catalyst the market needs to either close over $2.92 or below $2.80. A close over $2.92 has strong bullish implications as discussed in our weekly natural gas forecast. A close back below $2.80 would call for another test of support and possibly the contract lows. For now, $2.92 and $2.80 are the levels to watch for clarification of the near-term, and possibly the longer-term, direction.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

This is an important time for natural gas because the market is moving out of the spring shoulder months and into summer. The market had been poised to test the contract lows, which it did, but the lows held and prices reversed higher this week.

The July natural gas futures contract closed above $2.78 resistance on Tuesday and was driven by warmer temperatures in much of the eastern half of the U.S. To sustain the move warm weather will need to persist and key resistance at $2.92 must be overcome on a sustained closing basis. The market tested $2.92 in early trading Wednesday, but this level has held on a closing basis so far.

natural gas forecast

The $2.92 target is the gateway for a sustained summer rally because it is currently the most confluent target on the chart and makes connections to targets near, and well above, July’s $3.15 swing high. It the 62 percent retracement from $3.15 and the 0.168 projection for the move up from $2.54. A close over $2.92 will call for July’s $3.15 swing high to be challenged because the 1.00 projection for the wave up from $2.54 is $3.166.

The $2.92 level will probably be overcome in early trading tomorrow on an intraday basis, but again, the key will be a sustained close over $2.92. In fact, if there is another bearish EIA storage report tomorrow, the move up could stall.

First support is near yesterday’s $2.77 candlestick midpoint and the 38 percent retracement of the move up from $2.556. If the outlook is going to remain positive for at least the next few weeks then $2.77 should hold. Key support is $2.70, the 62 percent retracement. A close below this would put the market back into a cycle of testing the contract lows again.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

The price of natural gas, or any commodity for that matter, is theoretically the fair price at a given time. Traders will buy gas when they think prices are going to rise, and sell it when they think it will fall. This may be oversimplifying the process a bit (okay, a lot), but the point is that rising and falling prices are reflected on charts.

Charts tell us what traders and other market participants think about the market and the actions that they are taking (buying or selling). Interpreting price action on charts is the forte of technical analysis. Therefore, technical analysis is good at telling us what the market knows about itself, especially for the near-term.

For the long-term, technical analysis can be used as a guide, but people change their minds, and therefore, so does the market. When these changes of heart and mind take place, so does the direction of the market and the reflection of price action on the charts. As a result these changes are reflected in the underlying technical factors too.

Here is what we are currently seeing on the daily chart and the $0.035 Kase Bar chart:

  • Tuesday’s close above Friday’s midpoint was positive but the $2.716 open held.
  • The move up was corrective and about the same size ($0.125) as prior corrections from $2.902 ($0.136) and $2.788 ($0.099).
  • The KaseCD and KasePO momentum indicators are declining.
  • The underlying KEES permissions (color-coded dots) are transitioning back to being short.

natural gas forecast

Therefore, for the near-term, the natural gas charts are tell us that prices will continue to decline to at least $2.54. This is a confluent support target and is the July contract’s low. It is too soon to say that prices will stall here. In fact, other than a correction once $2.54 is met, most technical factors call for prices to continue to decline to major targets we discuss at great length in our weekly Natural Gas Commentary.

Resistance at $2.79 is the 38 percent retracement of the decline and expected to hold. This threshold will be lowered to $2.76 once $2.54 is met.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

Natural gas’ pullback still appears to be corrective, but has positioned itself to test a crucial decision point at $2.71. This is in-line with the $2.711 swing low, the 1.618 projection of the wave down from $3.105, and the 61.8 percent retracement of the move up from $2.443.

natural gas

The $2.71 objective should be challenged ahead of tomorrow’s EIA report, which is confirmed by KaseX’s short signals on the $0.035 KaseBar chart today. The confluence, positioning, and importance of $2.71 leads us to believe that it will hold, at least initially, and will be followed by a trading range similar to the one seen throughout March.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough natural gas forecast. If you are interested, please sign up for a complimentary four week trial.

For the past few weeks many traders have doubted the rationality of natural gas’ price surge and have been looking for a stalling point. It is hard to argue with the charts though, and our analysis, based purely on what is happening on the charts, has called for $3.05 as a potential stalling point. We have stated in our weekly Natural Gas Commentary that a correction from $3.05 would likely take place as long as it held on a closing basis. The $3.05 target was overcome by the $3.105 swing high, but Tuesday’s blow-off high and key-point reversal on the daily chart, KasePO and KaseCD divergences on the $0.035 Kase Bar chart shown below, and failure to close over $3.05 indicate the move up has stalled and the anticipated downward correction is now underway.

natural gas

Today’s close below $2.92, the 0.618 projection of the wave down from $3.105, opens the way for $2.85. We are looking for the correction to extend to at least $2.85 and possibly $2.73 over the next week or so. Tomorrow’s EIA number will not likely influence the downward correction unless it is extremely bullish and out of line with expectations.

Ultimately, we see that support between $2.85 and $2.73 will hold and a trading range similar to the one experienced from mid-February until late March between approximately $2.73 and $3.05 will ensue while the market awaits directional confirmation from summer weather and/or other related factors.

For a more detailed analysis and in-depth natural gas forecast take a trial of the Kase Commentary on Natural Gas today!