Natural gas continues to trend lower as it formed lower highs and lower lows inside a falling channel on its daily time frame. Price is in the middle of a correction and is nearing the channel top.
This resistance level lines up with the 61.8% Fibonacci retracement level around the $1.800 mark. If it’s enough to keep gains in check, natural gas could resume the slide back to the swing low at $1.417 or the bottom of the channel closer to $1.350.
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 resume than to reverse. Price is trading above the 100 SMA dynamic inflection point, though, so there may be some bullish pressure in play.
RSI is heading up to show that bullish momentum is still present, but the oscillator is closing in on the overbought zone to signal exhaustion. Turning back down could confirm that sellers are taking over and that the downtrend is about to resume. For now, price is testing resistance at the 50% Fib.
Stochastic has already reached the overbought zone to suggest that buyers could use a break and allow sellers to take control from here.
Natural gas is enjoying some upside on risk-on flows stemming from stronger than expected US jobs data released last Friday. The upside surprise suggests that the economy is starting to recover from the pandemic and that businesses and consumers could soon increase demand for commodities.
Up ahead, the next round of inventory numbers could spur intraweek volatility for the commodity, especially if the figures from the Energy Information Administration print upside surprises. Note that warmer weather conditions have set in across the US, so an increase in demand could mean plenty of upside for the heating commodity.