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Natural Gas: Momentum Takes A U-Turn

By Satendra SinghCommoditiesSep 18, 2021 01:17PM ET
www.investing.com/analysis/natural-gas-momentum-takes-a-uturn-200602327
Natural Gas: Momentum Takes A U-Turn
By Satendra Singh   |  Sep 18, 2021 01:17PM ET
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On Sept. 15, 2021, Natural Gas futures tested a seven-year peak at $5.644I amid continuous inflow of supportive weather news, while the Natural Gas bulls were sustaining above the psychological resistance at $5 since Sept. 12, after finding a breakout above the psychological resistance.

The next day, Sept. 16, the bulls didn't want to surrender so easily here as everything was in their favor to sustain the above psychological resistance that has now been turned into psychological support; attempted to bump once again and tested a high at $5.594. But, natural gas bulls were looking exhausted on Friday in the absence of a fresh inflow of supportive news and finally started to move downward in a hurry from the day’s high at $5.392 that has turned into an immediate resistance above $5.

Undoubtedly, Natural Gas Futures are at much higher pricing than is typical for this time of the year, and as a result, normalcy would appear to be making an come back, given enough time, but we have to be cautious at this point, since we are still one month away from the end of Hurricane Season, which generally starts from June 1 and continues up to Nov. 30.

The $5.00 level will attract a lot of headline attention, just as the $4.50 level will, with the $4.00 level the absolute floor in the market. A break below, and the market collapses. All things being equal, this is a market that will struggle to go higher from here, and even if there is a turn around rally from here, longer-term traders would then focus on the fact that the headlines have gotten far ahead of the reality.

At time of writing, Tropical Storm Odette had formed off the U.S. mid-Atlantic coast, the National Hurricane Center (NHC) said in its latest advisory on Friday. Odette was located about 325 miles (525 km) south-southwest of Nantucket, Massachusetts, packing maximum sustained winds of 40 miles per hour (65 km per hour), the Miami-based weather forecaster said.

"Strengthening is forecast during the next couple of days, and Odette is expected to become a strong post-tropical low by Saturday night."

The restoration of natural gas rigs is in the final stages, with some having started production. Secondly, the consecutive increase in weekly injection looks evident enough to surge bearish pressure on natural gas prices.

Technically, the formation of the ‘Exhaustive Weekly Candle' looked evident enough to surge a selling spree during the upcoming week. Should the Natural Gas futures start the week with a gap-down opening, that will be confirmation of the continuation of a steep slide amid growing volatility during the upcoming weeks. 

I've mentioned the possibility of repetition of 2018's moves in my previous analysis ‘Natural Gas Resuming Momentum, Before A Seasonal Peak, when natural gas started its first breakout in June 2021. Once again, similar volatile moves that tested the 2018 peak are are occurring now, which could continue onward. Natural gas futures witnessed a steep reversal of approximately $0.658 after testing a peak at $5.934 during the second week of Nov. 2018. They could see a low of $4.986 after testing the seven-year peak of $5.644 hit last week.

The upcoming week could find Natural Gas futures repeating the volatile moves that occurred during the second week of Nov. 2018—$4.866 to $4.126—which could also be repeated during the fourth week of Sept. 2021. The current situation looks alarming for the natural gas price level, before the advent of a final directional move during the upcoming week.

Natural Gas Futures Weekly Chart
Natural Gas Futures Weekly Chart

Natural Gas Futures Weekly Chart - November-December 2018
Natural Gas Futures Weekly Chart - November-December 2018

Natural Gas Futures Weekly Chart - September-October 2021
Natural Gas Futures Weekly Chart - September-October 2021

Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.

Natural Gas: Momentum Takes A U-Turn
 

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Natural Gas: Momentum Takes A U-Turn

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Comments (3)
Abdul Khaliq
Abdul Khaliq Sep 20, 2021 2:50AM ET
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How low it could go till nov??
Abdul Khaliq
Abdul Khaliq Sep 20, 2021 2:41AM ET
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Now a days his calculations is right
Al Jaf
Al Jaf Sep 19, 2021 11:35AM ET
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Thank you for your efforts. You seem to be spot on. Do you think its possible we go to pre-Ida prices around 4.2 this coming week before a sharp move up? and ....  Again, I am grateful of your knowledge and wisdom...
 
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Disclaimer: This analysis is purely based on the technical observations. I do not have any position in Natural Gas. One can create position in Natural Gas at his/her own risk.
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