Natural gas futures rebounded late Friday to close higher for the session after some weather models showed increasing chances of bitter cold weather this weekend and possibly the next two. After gapping higher to start the week and following through to the upside, natural gas ran into a wave of profit-taking and new shorting pressure as traders cast doubts about the intensity of the upcoming cold forecast. This selling pressure ended on Friday amid new concerns over the return of bitterly cold temperatures into the end of January and the first week of February.

On Friday, March natural gas futures settled at $3.239, up $0.065 or +2.05%. For the week, the futures contract was up $0.294 or +9.98%.

Bespoke Weather Services said that it expected “models to show significant long-range cold risks on Monday, as many of the colder risks currently seen are finally able to roll forward.” After being burned by predictions of cold weather in December, investors are being cautious at this time, while waiting for confirmation of the bitter cold forecasts.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, some of the upside momentum has slowed with the formation of the closing price reversal top on January 16.

A trade through $3.406 will negate the closing price reversal top and signal a resumption of the uptrend. A trade through $3.040 will signal the return of sellers. This could drive the market into the last main bottom at $2.809. A trade through this price will change the main trend to down.

The main range is $3.659 to $2.771. Its retracement zone at $3.215 to $3.320 is controlling the near-term direction of the natural gas market. On Friday, the market settled inside this zone.

The short-term range is $2.771 to $3.406. Its 50% to 61.8% retracement zone at $3.089 to $3.014 stopped the selling on Friday at $3.040. Aggressive longs are trying to form a secondary higher bottom.

On the upside, a major 50% level comes in at $3.690.

Daily Swing Chart Technical Forecast

Based on Friday’s close at $3.239, the direction of the March Natural Gas futures contract on Monday is likely to be determined by trader reaction to the 50% level at $3.215.

Bullish Scenario

A sustained move over $3.215 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to extend into the Fibonacci level at $3.320. Overtaking this level will indicate the buying is getting stronger with last week’s high at $3.406 the next likely target.

The trigger point for an acceleration to the upside is $3.406. If this move attracts enough buying volume, we could see a potential move into the next main top at $3.659, followed by the major 50% level at $3.690.