Natural gas might be in for a reversal from its climb as price is forming a head and shoulders pattern on its 1-hour chart. A break below the neckline could set off a drop that’s the same size as the chart formation.

However, the 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside or that the uptrend could resume. The gap between the indicators has narrowed to reflect weakening bullish momentum and a potential bearish crossover. Price is already below both moving averages, so these could hold as dynamic resistance on pullbacks.

Stochastic is on the move down but dipping into the oversold region to reflect exhaustion among sellers. Turning higher could mean that buyers are ready to return and push natural gas back to the latest highs or higher. RSI has more room to head south before indicating oversold conditions, so bearish pressure could stay in play.

Natural gas is on weaker footing as weather agencies predict warmer than usual temperatures for this time of the year. This could weigh heavily on demand for heating commodities, particularly at a time when business and consumer spending are dampened by the pandemic.

The upcoming catalysts this week could bring more volatility for commodities like natural gas as the focus might be on monetary policy and political developments. US President-elect Biden is scheduled to be inaugurated mid-week, and any major protests might impact overall market sentiment.

Meanwhile, a handful of major central banks are set to make monetary policy decisions this week, and leaning towards further stimulus could drive up traders’ appetite for risk. Vaccine rollout updates could also influence market sentiment and commodity price action, along with news on the new strain of the COVID-19 virus.