Natural gas is finding resistance at the $2.275 level and looks ready to resume its drop to the Fibonacci extension levels marked below. However, price is also trading inside a short-term ascending channel that might keep losses in check.
Price is down to the channel bottom and might be due for another bounce to the top, which is around the 200 SMA dynamic inflection point. On the subject of moving averages, though, 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 indicators is narrowing to reflect weaker bearish momentum. For now, the 100 SMA is holding as dynamic support close to the 38.2% extension.
A break below this could set off a slide to the 50% extension at the $2.117 mark or the 61.8% level at $2.079. The 78.6% level that lines up with the swing low could also serve as near-term support, but a break below this could take natural gas down to the swing low at $1.959.
Stochastic has room to head lower before indicating oversold conditions, which suggests that bears could stay in control for a bit longer. RSI also has some ground to cover before reaching the oversold level, but the oscillator already seems to be bottoming out to signal that buyers might be eager to take over soon.
The FOMC minutes spurred a sharp drop for commodities as policymakers reportedly debated a larger interest rate cut during their latest meeting. This could set the stage for even more interest rate cuts down the line, which reflects a much bleaker outlook than expected.
This could keep business optimism in check for the time being, which could mean slower demand for commodities like natural gas. It doesn’t help that the commodity demand is seasonally low at this time.