Technical Analysis #C-NATGAS : 2016-07-12

US demand for gas may slump as production hits high
Natural gas price fell 6% last week in US. Its production volumes total 73.1bn cubic feet which is close to historical high hit last year. The gas stocks in US are expected to hit a fresh historical low on Thursday when the weekly EIA data will come out. The stocks are expected to rise 39bn cubic feet to 3179bn cubic feet. Will Natgas continue declining?
Several US weather bureaus forecast a drop in temperature which may reduce demand for gas used to generate power for air conditioning. At the same time their long-term forecasts point at warmer winter in US than usually. Currently the daily average of gas consumption for two weeks is around 10% above the normal daily average in 30 years. Theoretically this may point at potentially lower demand. We do not yet expect the trend reversal in gas prices but also do not rule out the downward correction.


On the daily chart Natgas: D1 continues advancing. Now it is correcting down from its 13-month high and has already broken down through support of the short-term rising trend. The MACD and Parabolic indicators have formed signals to sell. The Bollinger bandshave widened which means higher volatility. The RSI is below 50 having formed negative divergence. The bearish momentum may develop in case the natural gas prices fall below the last fractal low and the first Fibonacci level at 2.66. This level may serve the point of entry. The initial stop-loss may be placed above the Parabolic signal, the last fractal high and 13-month high at 2.99. Having opened the pending order we shall move the stop to the next fractal high following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 2.99 without reaching the order at 2.66, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
PositionSellSell stopbelow 2.66Stop lossabove 2.99