Natural gas recently broke out of its descending channel on the 1-hour time frame to signal that a reversal from the selloff is due. Price has since completed its retest of the broken channel top as well.

Applying the Fibonacci extension tool shows the next potential upside targets. The 38.2% level is at $3.290 then the 50% level is at $3.946 near the swing high.

Stronger bullish pressure could take natural gas up to the 61.8% level at $3.972 or the 76.4% level at the $4.000 major psychological mark. The full extension is at $4.056.

The 100 SMA is still below the 200 SMA to indicate that the path of least resistance is to the downside or that there’s a chance for the selloff to resume. However price is finding support at the 100 SMA that lines up with the broken channel resistance.

Stochastic is also turning higher from the oversold region to reflect a return in bullish pressure. RSI is pulling up without even dipping to the oversold area, suggesting that buyers are eager to return.

Natural gas was previously under downside pressure as mixed weather forecasts hinted at a seasonal downturn in demand. After all, lower temperatures could mean that the summer months are coming to a close, weighing on purchases of cooling commodities.

More recently, weather models are signaling another pickup in temperatures, possibly leading to a temporary boost in purchases of natural gas.

Bespoke Weather Services noted that the European 15-day outlook gained about 12 gas-weighted degree days (GWDD) because of hotter changes seen in the eastern half of the nation. Natural Gas Intelligence reported on Friday that weather models flipped to forecast hotter days after looking a bit cooler for late August.

The upcoming inventory report would shed more light on supply and demand conditions over the past week.