Natural Gas Futures Show Signs of Breakout
The movements in natural gas futures in the last week indicate a breakthrough out of the bearish sentiments as the weekly closing witnessed a pause in selling sprees, and short-squeezing helped to regain strength.
Despite Friday’s reversal, natural gas futures remain in bearish territory until they sustain above the immediate resistance at $2.658.
As I wrote in my last piece on Friday, this expected bounce was indicated as the weekly low of the last week was well above the previous week’s low at $2.341.
This was the first time in a while for natty to deliver some fresh hope for the bulls, after a steep fall in the last weeks as the messy weather reports continued to keep demand low.
Last week, the EIA reported gas-in-storage stood at 2.366 trillion cubic feet, up 10.9% from the year-ago level of 2.249 trillion cubic feet.
The weekly inventory announcement last Thursday showed a withdrawal of 217 billion cubic feet, resulting in this reversal which continued till the week’s close.
Undoubtedly, Monday's weekly opening and follow-up moves will finally define the further directional trend.
Despite increasing volatility, a natural gas price spike is still on the cards, but depends upon the confirmation of a breakout above the significant resistance at $2.790 during the upcoming week.
Technically speaking, in a weekly chart, natural gas futures indicate probabilities of a gap-up opening as the futures had recovered more than 7% after falling more than 11% during the last week.
200 DMA still looks to be a significant resistance in a weekly chart at $3.754, which could be a challenge for the bulls.
In a daily chart, on Friday, natural gas futures sustained above 9 DMA, which is at $2.888, indicating that if the futures start the upcoming week with a gap-up opening, they could try to hit 18 DMA, which is at $2.815.