Natural gas found support on its retest of the broken resistance around $2.960 and is now testing the first upside target at the 38.2% Fib extension. Sustained bullish momentum could take it up to the higher levels.

The 50% level is at $3.083, which lines up with the swing high, then the 61.8% level is at $3.111. Stronger bullish pressure could take natural gas up to the 76.4% level at $3.147 or the full extension near $3.200.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that resistance is more likely to break than to hold. The gap between the moving averages is widening to reflect strengthening bullish momentum, and the 200 SMA recently held as dynamic support on the pullback.

However, stochastic is already indicating overbought conditions or exhaustion among buyers. Turning lower would mean that sellers are returning and could go for another pullback. RSI is also pointing down to suggest a return in selling pressure.

Natural gas prices are drawing support from stronger demand for cooling commodities now that warmer temperatures are setting in. The start of the summer months could bring an even larger boost in purchases of the commodity soon.

Christin Redmond, global commodity analyst for Schneider Electric’s Energy & Sustainability Services says “Weather has been overall supportive, coming out of the coldest winter for a couple of years, and this summer looks like it will also be quite hot.”

A pickup in risk-taking could also support gains for natural gas, especially as companies already start stockpiling heating commodities for the colder months. Then again, supply is likely to stay elevated as producers also increase output to fulfill demand.

Inventory data from the Department of Energy would once again shed more insight on supply and demand conditions, possibly boosting volatility mid-week.