Natural gas has formed lower highs and lower lows to trend inside a falling channel on its 4-hour chart. Price just broke past the mid-channel area of interest and looks ready for a test of resistance around $2.700.

If this keeps gains in check, the selloff could resume and take natural gas back to the channel bottom around $2.200 or at least until the middle. The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that resistance is more likely to hold than to break.

Then again, price has climbed above both moving averages or dynamic inflection points to signal that bullish pressure is picking up.

Stochastic is heading higher but already in the overbought zone to reflect exhaustion among buyers. Heading back down would indicate that selling pressure is picking up. RSI is also on the move up and has a bit of room to climb before reflecting overbought conditions, so bullish momentum could stay in play.

Natural gas enjoyed some upside towards the end of the year on optimism about US stimulus, as this would likely keep businesses and consumers supported. Cooler temperatures have also been observed, spurring stronger demand for heating commodities.

Looking ahead, the FOMC minutes and NFP report might have an impact on commodity prices since these typically influence market risk sentiment. Indications that more stimulus could be doled out might be bullish for natural gas since this would boost demand.

The upcoming inventory report from the Department of Energy would likely impact natural gas volatility as well. A build in stockpiles would reflect weaker purchases or potential oversupply, possibly dragging the commodity back down. On the other hand, a reduction could indicate that demand is supported, which would be bullish for natural gas.