Natural Gas (NATGAS/USD) Price Technical Analysis for Aug. 12, 2020

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Natural gas could be due for a downtrend as price is forming a complex head and shoulders pattern on its 1-hour chart. A break below the neckline around $2.100 could set off a drop that’s the same height as the chart formation.

The reversal pattern spans around $0.100 so the drop could take natural gas down to the $2.000 level. The 100 SMA is above the 200 SMA for now, though, so support is more likely to hold than to break. Then again, the gap between the indicators is narrowing to reflect weakening bullish momentum and hint at a potential bearish crossover.

RSI is pulling up after dipping close to the oversold region, suggesting that bullish momentum could return while sellers take a break. Stochastic already reached the oversold area to show that bears are exhausted, and turning higher could confirm that buyers are taking over. If so, a move back to the highs around the $2.200 mark could follow.

Natural gas prices are under pressure leading up to the inventory report as a build in stockpiles is eyed.  Expectations are for a 40 Bcf increase in according to survey provider Estimize versus the previous week’s 33 Bcf increase. 

A larger than expected increase could put more downside pressure on prices while a surprise draw could confirm stronger demand and drive prices higher.

Meanwhile, cooling temperatures could prove bullish for natural gas as this would drive up purchases of heating commodities in the coming months. A pickup in risk appetite stemming from positive developments in coronavirus vaccine trials could also drive commodities higher.

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