Natural gas looks ready to resume its slide after breaking below a rising trend line and completing its retest. Applying the Fibonacci extension tool shows how low price could go.
The 100 SMA crossed below the 200 SMA to indicate that the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break and price might be ready to head to the next downside targets. Both moving averages are holding as dynamic resistance levels as well.
The first support area is located at the 38.2% level or $1.615 then the next one is at the $1.600 mark near the swing low. Stronger selling pressure could take natural gas down to the 61.8% extension at $1.574 or the 78.6% level near the $1.550 mark. The full extension is at $1.509.
RSI is turning lower to signal that selling pressure is picking up even without seeing overbought conditions. Stochastic is also moving south, so price could follow suit as bearish momentum returns.
Natural gas is tumbling as traders weigh in the impact of warmer weather conditions on demand for the next few months. Summer season has already set in, which means that consumers have less need for heating commodities.
Risk-off flows coming from geopolitical risks could also dampen demand for commodities, including natural gas. Then again, the prospect of more nations and states reopening could keep some losses in check.
Natural Gas Intelligence reported that Bespoke sees that the move to a La Nina base state favors a hot summer, which may add some strength to power burns.
“With projected global angular momentum anomalies heading negative over the next two weeks, signifying the atmosphere’s move toward a La Nina base state, confidence is increasing” in overall hotter trends for the summer, Bespoke said. “While not an extreme pattern at the moment, other than in parts of the central U.S. where stronger anomalies are most persistent, there is just a lack of cooling anywhere once beyond the start of next week. This keeps projected demand above even the hotter 10-year normal.”