Natural gas could be due for a reversal on its slide as price is forming a double bottom pattern on the 4-hour time frame. Price also looks due to break the neckline resistance to confirm that an uptrend might follow.
However, the 100 SMA is still below the longer-term 200 SMA on this time frame to indicate that the path of least resistance is to the upside. In other words, the selloff is more likely to resume than to reverse. Then again, price has broken above the 100 SMA dynamic inflection point as an early indication of bullish pressure.
RSI is already indicating overbought conditions, though, and turning lower could confirm that bearish momentum is picking up. Stochastic has a bit of room to climb before reaching the overbought zone, so buyers might have some energy left for a break higher.
If so, a move past the $2.400 mark could confirm a double bottom neckline break and set off a climb that’s the same height as the reversal pattern that spans $2.300 to $2.400.
Natural gas is facing long-term downside pressure on account of seasonal demand, which is expected to drop during the summer months in the US. Still, there is upside pressure on account of the Saudi Arabia contract to purchase natural gas.
Projections that peak summer consumption is just around the corner in July could mean more downside pressure on prices as stockpiles would likely build up by then. Of course producers are likely adjusting to this seasonal drop over the next couple of months as well.
Meanwhile, overall market sentiment could push the commodity price around in the days ahead, especially with the Fed gearing up for its policy decision. Any indication that a rate cut is possible later in the year could prop commodities higher on risk appetite.