Natural gas staged a strong rally last week, enough to break past the neckline of the inverted head and shoulders on its weekly time frame.

This suggests that a long-term climb might be underway, possibly sending the commodity price up by the same height as the chart formation. However, technical indicators are hinting that bearish pressure is in play.

The 100 SMA is below the 200 SMA on the weekly chart, indicating that the path of least resistance is to the downside or that the selloff is likely to resume. Price is above both moving averages, though, so these could hold as dynamic support on dips.

Stochastic already reached the overbought zone to reflect exhaustion among buyers, so turning lower would mean that sellers are taking over. RSI is also in the overbought zone, which suggests that buyers could take a break from here.

Then again, this could simply spur a quick pullback to the broken neckline, which might now hold as support around the $3.000 major psychological mark.

The return in risk-taking over the past week, combined with the smaller build in natural gas stockpiles, led to a rally for the commodity. The EIA reported a build of 55 Bcf versus the expected increase of 64 Bcf, but this was still larger than the earlier gain of 16 Bcf.

Still, forecasts of warmer weather in the coming weeks could keep demand for the cooling commodity supported in the near-term. Sustained risk appetite could also be bullish for natural gas, especially since the Fed has downplayed the likelihood of tapering or tightening soon.

The upcoming NFP report might still impact overall market sentiment since this could affect Fed policy expectations. Apart from that, the weekly inventory report from the Department of Energy could also spur mid-week volatility.