Natural gas looks ready to gain traction on its reversal as price is finding support at the broken trend line resistance. Applying the Fibonacci extension tool shows the next potential upside targets.

Price is already testing the 38.2% level at $2.666 that lines up with the 100 SMA dynamic inflection point. A break past this could lead to a test of the 50% level at $2.741 or the 61.8% Fib at $2.817. Stronger bullish momentum could take natural gas up to the 76.4% level that lines up with the swing high at $2.910 or the full extension.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the climb is likely to carry on. However, stochastic is already in the overbought zone to reflect exhaustion among buyers, and turning lower would mean that sellers are returning.

RSI has a bit of room to climb before reflecting overbought conditions, but the oscillator already appears to be topping out to suggest that sellers are eager to take over.

Natural gas might be finally ready to take on its seasonal rallies as weather conditions start to cool down in several parts of the US. Recall that forecasts of warmer than usual temperatures weighed on demand for the heating commodity in the past weeks.

Still, the latest inventory report from the Department of Energy indicated sustained purchases of natural gas since there was a draw in stockpiles. Another reduction in this week’s release could confirm that the commodity might stay supported in the near term.

Apart from that, risk-on flows stemming from optimism about the Biden administration and more stimulus from central banks is also supporting higher-yielding assets like commodities. The vaccine rollout could also spur risk appetite, although the rising number of cases from the new strains of the virus could limit gains.