Natural gas recently fell below its ascending channel bottom and has since retested the broken support, which held as resistance. Price could keep aiming for the downside targets from here.
The Fibonacci extension tool shows where the next potential support areas might be, and price is testing the 50% level already. Sustained selling pressure could take it down to the 61.8% Fib at $2.425 or the 76.4% level near $2.400. The full extension is at $2.352.
The 100 SMA already crossed below the 200 SMA to confirm that the path of least resistance is to the downside or that further losses are likely. Price is trading below both inflection points, so these could hold as dynamic resistance on pullbacks.
Stochastic is already indicating oversold conditions, though, so a return in buying pressure might follow. RSI is also in the oversold area to signal exhaustion among sellers and a possible return in bullish momentum.
Natural gas is under weak footing as analysts say that the infrastructure plan of the Biden administration could mean significant losses for the commodity. Recall that his campaign featured a “Clean Energy Plan” to achieve a national net-zero carbon emissions outcome by 2050 based on “technology-neutral standards.”
Apart from that, warming weather conditions are also observed in several parts of the US, dampening demand for the heating commodity. Supply conditions are also likely to stay elevated as producers might have ramped up output to make up for lost income during the winter storms in the earlier months.
The upcoming release of the inventory report from the Department of Energy should indicate whether or not purchases have taken hits in the past week. The earlier report indicated a build of 14 Bcf, so a larger increase this time might mean more downside for natural gas.