Natural Gas Forecast: July Challenges Its 2016 High

Warm summer weather and a smaller than expected build reported last Thursday were allegedly the catalysts for the surge higher to $2.635. The recent string of smaller than expected builds has some analysts and traders speculating that the glut of gas in storage may shrink much faster than originally expected.

July natural gas challenged its $2.635 high made January 8, 2016 on June 13. So far, this important resistance level has held and prices have settled into a choppy range between $2.535 and $2.635. The market is most likely waiting for tomorrow’s EIA Natural Gas Storage Report before breaking higher or lower out of the range.

There is little doubt that the longer-term outlook for natural gas is positive. The sustained close over $2.57, the 1.00 projection for the wave $1.939 – 2.427 – 2.08, calls for $2.75 and possibly $2.87, the 1.382 and 1.618 projections, respectively. The move up is due for a correction, but a significant pullback might not take place until these targets are fulfilled. We doubt prices will rise above $2.87 without a major correction first.

NGN6 20160615

That said, $2.635 has held and the KasePO PeakOut and an overbought Stochastic indicate a deeper pullback might take place first. There is also a double top (some might argue a triple top) at $2.635. Tomorrow’s EIA number, if bearish, could lead to a break lower out of the range.

First support is $2.535, and a close below this would confirm the double top and call for $2.44. The $2.44 level is expected to hold. A close below this would indicate the market is reassessing the validity and strength of the recent move up.

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.

Published by

Dean Rogers, CMT

Dean Rogers, CMT is the general manager of the Kase Call Center in Albuquerque, New Mexico. He oversees all of Kase and Company, Inc.’s operations including research and development, marketing, and client support. Dean began his career with Kase in early 2001 as a programmer but has developed into Kase’s senior technical analyst. He writes Kase’s award-winning weekly Crude Oil, Natural Gas, and Metals Commentaries. He is an instructor at Kase's classes and webinars and provides all of the necessary training and support for Kase's hedging models and trading indicators for both retail and institutional traders.

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