Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: How Low Can Natural Gas Go? Maybe Not Much

By Fawad RazaqzadaCommoditiesJul 10, 2020 10:17AM ET
www.investing.com/analysis/chart-of-the-day-how-low-can-natural-gas-go-maybe-not-much-200530331
Chart Of The Day: How Low Can Natural Gas Go? Maybe Not Much
By Fawad Razaqzada   |  Jul 10, 2020 10:17AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article has been written exclusively for Investing.com

Natural gas prices have fallen for the third consecutive day to relinquish almost all this week's gains. NG has lagged other commodities post-lockdown and remains near historic lows because of concerns over excessive supply and weak demand, as renewed lockdowns to contain the spread of coronavirus is expected to limit gas consumption. That said, the weather is seen getting hotter for most of the US over the next couple of weeks and this should mean increased demand for cooling.

Additionally, most of the bearish factors weighing on natural gas ‘should’ now be priced in, which means the downside is limited going forward. Indeed, given that prices are near zero at $1.754 per million British thermal units, there is only so much further they could fall. But one of the key risks facing traders looking to buy NG is that prices could remain low for a long period of time. So, speculators must proceed with caution, remain nimble and take it from one level to the next when it comes to trading NG in this current market environment.

From a technical point of view, natural gas has created some tentative bullish signals, which suggest a low may have already been formed at the end of June. But as the downward trend is still intact, we need to see some further confirmation before concluding that prices have indeed bottomed. Take a look at the weekly chart:

Weekly Natural Gas Futures
Weekly Natural Gas Futures

While the bearish channel remains intact, the key price development I would like to draw your attention to is the potential false break reversal that took place at the end of June, when the sellers once again failed to sustain the breakdown below the 2016 low of $1.611 like the previous several times. Since that fake-out happened, NG prices rallied sharply at the start of July before easing back down over the past few days. With prices breaking above a few short-term highs, the trend may have already reversed. But we still need some confirmation. On the weekly, a close above the bearish channel around $1.900 is what I am looking for. 

Testing Support

Now on the daily time frame, we can see that NG was testing a potential support zone between $1.710 and $1.750, an area which was formerly resistance: 

Daily Natural Gas Technicals
Daily Natural Gas Technicals

While there were no signs of a bounce from the above support zone when this report was written, given the weekly technical developments, I would not be surprised if prices turned higher from around here, either later on today, or early next week.

So, in a nutshell, with gas prices being near historic lows and taking into account the above tentative bullish signs, I am now on the lookout for further bullish price action to confirm a low is made. As mentioned, this could be in the form of a breakout above the bearish channel on the weekly, or resistance circa $1.900 which is also quite visible on the daily time frame as well.

But at what stage do I admit I am reading this wrong? Well, I think for as long as we remain above that 2016 low of $1.611, the bullish case will remain valid. However, a daily close back below this level would probably invalidate the short-term bullish price structure. In this event, bullish speculators will need to wait for further price action before looking for long entries again. 

Chart Of The Day: How Low Can Natural Gas Go? Maybe Not Much
 

Related Articles

Phil Flynn
The Energy Report: The Drain Game By Phil Flynn - Aug 12, 2022 2

There is a lot of market talk about Asia buying up cheap barrels of U.S. crude because the spread between WTI and Brent prices are wide. The reason the U.S. West Texas prices are...

Alexander Kuptsikevich
Crude Oil Could Slump To $66 By Alexander Kuptsikevich - Aug 12, 2022 3

WTI crude oil has gained more than 6.5% this week, and this strengthening has a pinch of irony. Stock indices managed to surpass the highs of the previous week’s pullback and the...

Chart Of The Day: How Low Can Natural Gas Go? Maybe Not Much

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
KoolAid Trader
KoolAid Trader Jul 11, 2020 7:13PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Rise in Gas & Oil coming soon!! 🚀🌙
Zack Harding
Zack Harding Jul 11, 2020 10:58AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
All the article discusses are number and chart mechanics, the reality is natural gas is over supplied beyond anything in history. Five year inventory averages of existing inventory are getting smoked and our production is through the roof on much lower well numbers.Recent spike was a dead cat bounce, we will see $1.40 when everyone thinks we should be above two.Here, dont take my word fir it...https://www.eia.gov/naturalgas/weekly/#jm-storage
Satendra Singh
Satendra Jul 10, 2020 7:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I really appreciate your analysis. But get ready to receive humiliation from some frustrated readers who will never leave any opportunity to blame you.for their own mistakes.
Satendra Singh
Satendra Jul 10, 2020 7:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why do you want to join "Humiliation Club of Natural Gas Analyts' '?
Joo Eun Baik
Joo Eun Baik Jul 10, 2020 7:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sir just admit whatever you did in your life, last year was the big failure. you were biased and ignored the signs of natural gas market was going down.
Joo Eun Baik
Joo Eun Baik Jul 10, 2020 7:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
maybe not the personal attack but you analysis since las year on ng was f-
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email