Natural gas is testing the rising trend line support on its 4-hour chart, and technical indicators suggest that a bounce is due. In that case, price could recover back to the swing high at $3.314 from here.
The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support is more likely to hold than to break. The gap between the indicators is widening to reflect strengthening bullish momentum, and the 100 SMA dynamic support lines up with the trend line and 61.8% Fib to add to its strength as support.
Stochastic is also turning higher after indicating oversold conditions for some time, suggesting that buyers are ready to take over while sellers take a break. RSI has some room to head south, though, so there could still be some losses in the cards.
Price might still find support at the 200 SMA dynamic inflection point, but this would be the line in the sand for a pullback. A break below this level around $2.750 could set off a reversal from the uptrend.
Natural gas price movements could hinge mostly on the outcome of the Department of Energy’s inventory report. Another draw in stockpiles is eyed, especially since the winter storms led several production facilities to temporarily shut down in the past week.
At the same time, demand for heating commodities likely picked up as temperatures dropped. Weather agencies continue to predict cooler temperatures in the weeks ahead, so consumers and businesses are likely loading up on natural gas supplies.
A surprise build or smaller than expected draw, however, would signal that the impact of the winter storms was not as strong as expected or that demand remains feeble. Still, risk-taking for the most part of the week could continue to keep natural gas supported.