Natural gas is trending lower as it formed lower highs and lower lows inside a falling channel on its 4-hour chart. Price is testing the channel resistance and could be due for a move back to nearby support levels.

Price could dip to the mid-channel area of interest at $2.500 or the channel support closer to $2.200 from here. The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse.

However, the gap between the moving averages is narrowing to reflect weakening selling pressure and a potential bullish crossover. If that materializes, natural gas might be able to break past the channel top around $2.700 and go for a reversal from the slide.

Stochastic is already indicating overbought conditions or exhaustion among buyers, and turning lower could confirm that bearish pressure is picking up. Similarly RSI is starting to turn lower without reaching the overbought zone, indicating that sellers are eager to take over.

Natural gas is enjoying some upside as risk appetite has improved recently, encouraging traders to pursue higher-yielding assets like commodities. At the same time, forecasts of cooler weather are also lifting demand for the heating commodity.

The upcoming release of the FOMC minutes could materially impact overall market sentiment and allow for more volatility in natural gas prices. The NFP report might also bring in bigger moves, with a large increase in joblessness likely weighing on commodity prices.

Of course the inventory report from the Department of Energy is one to watch out for, as a large reduction in natural gas stockpiles might bring in more gains for the commodity. On the other hand, a surprise build would likely allow the selloff to resume.