Natural gas is resuming its climb, as it bounced off the rising trend line on the 4-hour time frame and is testing the first upside target marked by the Fibonacci extension tool.
Stronger bullish pressure could take natural gas up to the 50% extension at $4.151, which lines up with the swing high. The 61.8% level is at $4.233 then the 76.4% level is at $4.311. The full extension is at $4.455.
The 100 SMA is above the 200 SMA on this time frame to confirm that the path of least resistance is to the upside or that support levels are more likely to hold than to break. Stochastic is also on the move up to indicate that buyers have the upper hand, but the oscillator is closing in on the overbought zone to reflect exhaustion soon.
Turning lower could mean that sellers are returning or that another pullback from the uptrend is in the works.
Natural gas is drawing support from forecasts of warmer weather up ahead since this would mean higher purchases of heating commodities.
The midday Global Forecast System model, however, trended even hotter for next week into the following week, gaining more than 5 CDDs, NatGasWeather said.
“This should increase power burns to 45 to 47-plus Bcf/d, an impressive amount, thereby resulting in a couple smaller-than-normal builds to finally push current deficits of 168 Bcf to near or over 200 Bcf,” the agency explained.
Combined with weakening production, this could mean plenty of upside for prices. Tennessee Gas Pipeline (TGP) on Monday posted a notice that repairs are planned, requiring the unit to be offline.
The upcoming inventory report from the Department of Energy would shed more insight on supply and demand conditions, as another smaller than expected build could lift natural gas prices during the week. A surprise draw might even lead to another sharp rally.