Midweek Natural Gas Forecast – June 17, 2015

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!

Many traders and analysts have been skeptical of natural gas’ recent price surge. However, technical analysis is good at telling us what the market thinks about itself, and it is hard to argue with the bullish technical factors that have formed over the past few weeks.

The June natural gas futures contract is testing a crucial decision point at $2.93. This is an important confluence point for many technical factors and is most importantly the 0.618 projection for the waves up from $2.481 and $2.711. The near-term fate of natural gas prices will be determined by a close above or below $2.93.

natural gas prices

A close over $2.93 would indicate market participants are expecting a bullish EIA report tomorrow and for prices to push for at least $3.05. There is a momentum divergence setup on the KasePO, which indicates the move up is becoming exhausted. However, based on many other positive technical factors, we expect to see a close over $2.93 and rise to at least $3.05, which is the next lynchpin for a bullish summer recovery.

A close below $2.93 would signal continued hesitance and doubt that this move up will be able to overcome $3.00. Look for support at $2.78 and $2.66. Even upon a significant correction we expect $2.66 to hold.

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It is hard to deny the strength of the natural gas price rally over the past two weeks. Last week’s bullish engulfing line, April’s bullish hammer and morning star setup, and bullish daily divergences on the KasePO, KaseCD, MACD, RSI, and Stochastic are all technical evidence that the move down may finally be complete. However, many traders are skeptical of the move up and are asking what fundamental factors would support a recovery over the course of the longer-term. It is a fair and accurate question. Tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update should provide a strong clue regarding the potential strength of a continued natural gas price rise.

In addition to the aforementioned bullish technical factors on the monthly, weekly, and daily charts, the short term technical factors and wave formations show evidence for a move to at least $2.93. This is a decision point because it is the 2.764 (XC – shown in red) projection for the wave up from $2.481, the 1.00 (E – shown in pink) from $2.557, and the 1.618 (L – shown in purple) from $2.747. In addition, $2.93 is the last level protecting mid-March’s $2.982 swing high. A sustained close over this would open the way for an extended move to targets above $3.00. However, $2.93 will not likely be tested until after tomorrow’s EIA report, if at all, because most traders are waiting for confirmation from another lower than expected build.

natural gas prices

There is good reason to be suspicious of this move up, and a disappointing EIA report tomorrow could be the catalyst to turn prices lower again in very short order. Therefore, until there is a sustained close over $2.93 caution is warranted.

The daily chart has formed a hanging man and evening star setup as of this mid-day analysis, and a close below Monday’s $2.78 midpoint would complete the pattern. This would then open the way for $2.65, the 50 percent retracement of the move up and last week’s midpoint. A close below $2.65 would confirm the move up is over and most likely point toward the market settling into a trading range while it sorts itself out.

Request a trial of our weekly energy forecast on natural gas to learn more.

For the second week in a row natural gas futures gapped lower on Monday. This might be an exhaustion gap, which in many cases signals the end of a long and drawn out trend. The top of the gap at $2.555 has been overcome as of Wednesday midday, and a close over this would call for an extended correction to at least $2.67, the top of last week’s gap and the 38 percent retracement from $2.982. These technical factors could be an early warning that a bottom has finally been made.

That said, we think it is premature to definitively state the bottom has been made. We will hold off on delving too deeply into that conversation until at least $2.67 is overcome. Most technical and fundamental factors are still negative, and while we do think the market is nearing a bottom, most evidence points to a target about 10-15 cents lower. The June contract met confluent support at $2.48, but the key objective that we have identified for weeks in our detailed natural gas forecast has not been met yet. A close back below $2.555 before the end of the week would signal that the upward correction has failed again.

Request a trial of our weekly energy forecast on natural gas to learn more.

Natural Gas Prices

Natural gas futures nearly filled Monday’s gap down from $2.625. This is crucial resistance because it is near the 38 percent retracement from $2.949 and the confirmation point of April 15th’s morning star. A close over $2.625 would call for the upward correction to extend and challenge key resistance at $2.77. We still think resistance will hold, and a move below the $2.533 swing low will shift odds strongly back in favor of challenging the $2.475 low again.

For a more in-depth natural gas forecast please take a trial of Kase’s Natural Gas Commentary.

natural gas forecast

May natural gas futures stalled at $2.475 after meeting the 0.618 target for the wave $2.949 – 2.583 – 2.719. A close over $2.576 will complete the bullish morning star and a close over $2.624 would confirm it. In addition, the confirmed bullish KaseCD divergence and second class long KEES permissions indicate the upward correction should extend. A normal correction will hold the 38 percent retracement from $2.949 at $2.66. An extended correction is expected to hold $2.77, the 62 percent retracement.

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natural gas prices