Natural gas has formed lower highs and lower lows to create a descending channel on its 4-hour time frame. Technical indicators are showing that bears could still have the upper hand while the channel resistance is being tested.
Price could resume the slide to the levels marked by the Fibonacci extension tool. The 38.2% extension is at $2.222 while the 50% level near the mid-channel area of interest is around the $2.200 major psychological mark. Sustained selling pressure could take natural gas down to the 61.8% level and swing low at $2.160 or the 78.6% level closer to the channel support at $2.115. The full extension is located at $2.058.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. Price is currently finding resistance at the 100 SMA dynamic inflection point, and the gap between the indicators is widening to reflect increased bearish momentum.
RSI is heading lower to show that sellers have the upper hand and this could go on for a while as the oscillator has plenty of room to slide before hitting the oversold region. Stochastic also just made its way down from the overbought zone to show that selling pressure is picking up.
Natural gas is still stuck in consolidation as market forces seem to be pulling it in opposite directions. On the one hand, there’s the weakening demand for the next few months on account of warmer weather conditions across the US.
On the other hand, risk appetite seems to be picking up in general as central banks have been shifting to more dovish biases, likely resulting in easing policies and improved business sentiment. In turn, this could bring increased demand for commodities like natural gas.