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Natural Gas: Reversal Yet to Get Confirmation

Published 12/24/2023, 10:20 AM

Since I wrote my last analysis on Nov. 29, 2023, Natural Gas futures were trading at $2.626, struggled to find a breakout above their immediate resistance at $2.858, but could not and started to slide downward and hit this seasons low at $2.235 on Dec. 13, 2023 before a steep reversal that continued till Dec. 22, 2023.

Natural Gas Futures Daily Chart

Once again, the natural gas futures are just below the 200 DMA in the daily chart, making the situation extremely uncertain as the bulls are still not comfortable loading long positions till the natural gas futures confirm the first trading session of the upcoming week with a sustainable move above the 200 DMA in the daily chart shows that the coming Tuesday will be a turning point for the natural gas bulls.

Undoubtedly, the natural gas futures tried to hold above the 9 DMA, with the formation of two bullish daily candles on last Thursday and Friday, but closed below the 200 DMA, which is currently at $2.622 in the daily chart.

If the natural gas futures start the upcoming week with a gap-up opening on the first trading session and sustain above the 200 DMA, the advent of an uptrend will likely get first confirmation on next Tuesday.

Natural Gas Futures Weekly Chart

In the weekly chart, the formation of bullish Doji Star confirms the advent of an uptrend, which is likely to keep the reversal intact during the upcoming weeks up to the next immediate resistances: first at $2.926 and second at $3.068 and the most significant resistance at 200 DMA which is currently at $3.819 in the weekly chart.

Fundamentally, the natural gas futures witnessed upward moves last Thursday and Friday due to positive weekly inventory announcements, as the weekly withdrawal was according to expectations. However, the demand for natural gas is still on the lower side due to mild temperatures across the US between December 22nd-28th, 2023.

According to natgasweather.com,

“Warmer vs normal temperatures will rule most of the US with highs of 30s to 50s across the northern US, while mild to nice across the southern US with highs of 50s to 70s. Mild weather systems will continue to track across the US with rain and snow but with little subfreezing air. Overall, light to very light national demand the next 7-days”.

Finally, I conclude that the next weekly candle of natural gas futures will define the further directional move from January 1st to February 29th, 2024, as the weather across the US and Europe could take a sudden U-turn during the upcoming week.

Disclaimer: The author of this analysis does not have any position in Natural Gas futures.  All the readers can take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world.

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