Natural gas broke below the bottom of its rising channel on the 4-hour time frame to signal that a reversal from the uptrend is due. Price looks ready for a quick pullback to the broken support before gaining traction on its slide.
The 100 SMA is crossing below the 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to pick up from here. Price is also trading below both moving averages as an indicator of selling pressure.
RSI is still pulling up from the oversold region to indicate that bullish momentum is picking up. Similarly, stochastic is starting to pull up to show that buyers are getting the upper hand. Both oscillators have plenty of room to climb before reaching the overbought region, so buyers could stay on for much longer.
Natural gas took another hit as weather forecasts predict warmer temperatures in this second week of December, thereby weighing on demand for heating commodities.
According to forecaster Commodity Weather Group LLC: “The trends into mid-month should keep getting warmer” without evidence of a stronger high-pressure area that would allow frigid conditions to settle over the lower 48.
Still, the presence of risk appetite could keep the commodity somewhat supported, but this hinges mostly on how US-China trade talks go. Signs that “phase one” of the deal could be signed soon might mean that tensions are fading and that demand for commodities could pick up again soon. On the other hand, escalating tensions could bring risk aversion back in the markets and weigh on natural gas.
Apart from that, traders will also be taking cues from inventory data from the Department of Energy as this would reflect supply conditions. A large draw could confirm that demand is keeping up with supply while a build could suggest oversupply concerns.