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Natural gas futures closed lower last week after hitting a five week high on a supply disruption early in the week. The weekly government storage report hit triple digits once again, but came in exactly where forecast.
Weather played a part in a rebound rally late in the week as traders continued to assess the chances of heat arriving the first week of June. Technical factors also played a role in the slight comeback with the market finding support just above a minor bottom and well above the late April bottom at $2.534.
Last week, July natural gas settled at $2.611, down $0.053 or -1.99%.
Weekly Swing Chart Technical Analysis
The main trend is down according to the weekly swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom at $2.534 during the week-ending April 26.
A trade through $2.534 will negate the closing price reversal bottom and signal a resumption of the downtrend. This could lead to a test of the February 2016 main bottom at $2.510.
A move through $2.731 will indicate the upside momentum is getting stronger. The main trend will change to up when $2.990 is taken out.
The minor range is $2.534 to $2.731. Its 50% level or pivot at $2.633 is controlling the short-term direction of the market.
The main range is $2.990 to $2.534. Its retracement zone at $2.762 to $2.816 is the primary upside target.
Weekly Swing Chart Technical Forecast
Based on last week’s price action and the close at $2.611, the direction of the July natural gas futures contract is likely to be determined by trader reaction to the weekly pivot at $2.633.
Bullish Scenario
A sustained move over $2.633 will indicate the presence of buyers. If this can create enough upside momentum then look the rally to possibly extend into last week’s high at $2.731. A bullish weather report would be the catalyst that fuels this move.
Taking out $2.731 will indicate the buying is getting stronger. However, buyers could run into a wall of resistance at the main retracement zone at $2.762 to $2.816.
Bearish Scenario
The inability to overcome $2.633 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the main bottom at $2.534, followed by the longer-term bottom at $2.510.
This article was originally posted on FX Empire