Natural gas continues to trend lower and is below a short-term falling trend line as well. However, support at the longer-term descending channel is currently holding, so another quick pullback might follow.
Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the trend line around $2.200 and might be enough to keep gains in check. This lines up with the mid-channel area of interest as well.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. The gap between the moving averages is also widening to reflect increased bearish momentum and the 100 SMA seems to be holding as dynamic resistance.
RSI is turning lower to signal the presence of selling pressure that could take the commodity below the swing low at $2.030. In that case, a steeper slide could follow from here. Stochastic is also pointing down to indicate that bearish momentum is returning.
Commodities are consolidating at the moment as traders await the next developments in US-China trade talks. Further signs of conflict could weigh on higher-yielding assets like natural gas while indications that a deal could be struck might lead to a relief rally.
Traders are also on the lookout for inventory data as stockpiles might indicate another buildup on account of weaker demand conditions. After all, purchases of natural gas tend to dip around this time of the year, thereby weighing on prices as well.
However if the Department of Energy reports a surprise draw in stockpiles, the commodity might be able to gain some momentum on its correction. Still, the longer-term trend is to the downside and several upside barriers are in place.