WIth recent colder temperatures in the U.S. and other areas, natural gas futures have started to rise in demand. However, this market has been very bearish over the course of the Autumn of 2017 to late December. While natural gas recently made a higher low and yesterday a higher high, we believe that this market is hitting a critical resistance area.
Today, using the daily chart below that covers the last fifty weeks of price action, we will look at some technical reasons why we think natural gas is running into a ceiling of resistance.
On the chart, the orange trendline connects a series of lower highs from May to September to November 2017. The yellow trend line connects the September to November lower highs. These two trend lines come into play at the 3.175 to 3.190 area, which is just above this market’s current price.
In addition, the grey shaded zone on this chart from 3.140 to 3.250, which price is beginning to enter, served as support for much of 2017 but then turned into resistance. It is in this area that the trend lines converge, creating a good area to short this market.
However, should natural gas break above the trend lines, the natural target would be the November 3.318 high marked by the black price line.
To the downside is a steep lower trend line in grey. We do not think this will offer support but view it as more of an indicator of price action. Once the market breaks below this trend line the natural targets become this month’s low, marked in green at 2.746, and then the 2017 low made in December, marked in red at 2.562.
We should note now that heading into late January and February, the United States is moving into the coldest period of winter, and that this market may become very volatile due to changing weather. Traders should manage this volatility in a responsible way.