Natural gas continues to trend higher on its 4-hour chart, as price bounced off the ascending channel support and is climbing past the mid-channel area of interest.
Sustained bullish momentum could take it up to the next upside targets marked by the Fibonacci extension tool. Price is testing the 61.8% extension at $4.212 and a move higher could take it to the 76.4% level that lines up with the channel top at $4.300. The full extension is at $4.443.
The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the uptrend is likely to gain traction. The 100 SMA dynamic inflection point is also near the channel bottom at $4.000 to add to its strength as support in the event of dips.
However, stochastic is already indicating overbought conditions or exhaustion among buyers, so turning lower would mean that sellers are taking advantage.
Natural gas is finding strong support from seasonal factors, particularly higher temperatures that warrant demand for cooling commodities. Forecasts of even warmer weather up ahead and reports of heat waves are lifting purchases of natural gas.
The upcoming inventory release from the Department of Energy is slated to show a smaller build in stockpiles of 19 Bcf versus the earlier 36 Bcf increase. An even small gain in inventories or a surprise draw could confirm that demand picked up, which would be very bullish for the commodity.
Other potential catalysts include the NFP release that might impact overall market sentiment late in the week. A disappointing read could confirm that the Fed is unlikely to reduce stimulus anytime soon, which would be supportive of business and consumer activity. In turn, this could keep risk-taking in play and support higher-yielding assets like commodities.