Natural gas is pulling up to the nearest retracement level after its sharp slide, but it could still be due for a larger correction on its downtrend. If any of the Fibonacci levels hold as resistance, price could resume the drop to the swing low or lower.
Price seems to be finding resistance at the 38.2% Fib around $1.967 but might still pull up to the 50% Fib that lines up with the 100 SMA at $2.040. A larger retracement could take natural gas up to the descending trend line that lines up with the 61.8% level at $2.081. The 200 SMA might be the line in the sand for a correction around $2.150.
On the subject of moving averages, the 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. The gap between the indicators is also widening to reflect increased bearish momentum.
RSI has been heading higher but seems to be changing its mind halfway through and turning back down. This suggests that sellers are eager to return at current levels. Stochastic is also topping out without even reaching the overbought region, indicating that bearish momentum is returning.
The Energy Information Administration reported a decline of 92 billion cubic feet for the week ended Jan. 17. That was slightly larger than the decline of 88 billion cubic feet forecast by analysts polled by S&P Global Platts.
However, the commodity barely drew any support from the report as traders took it as a sign that producers also pared output in order to account for subdued demand. Note that weather forecasts and actual conditions showed milder temperatures than usual for this time of the year, keeping a lid on purchases of heating commodities.