Natural gas has formed lower highs and higher lows to create a symmetrical triangle pattern on its 1-hour chart. Price is testing the resistance of the triangle and could be due for a move back to support again.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that resistance is more likely to hold than to break. In that case, a drop back to the $1.750 support might follow or perhaps even a break lower. If the latter happens, natural gas could fall by the same height as the chart formation, which spans $1.500 to around $1.950.
Volume is still somewhat elevated to signal potential momentum if a breakout happens. A break above the current levels could be followed by a rally of the same size as the triangle as well.
Stochastic is already indicating overbought conditions or exhaustion among buyers, so turning lower could confirm that sellers are returning. ADX is above 25 to signal a potential trend but is still below 50 to show that there’s no momentum just yet.
Natural gas traders could be waiting for more clues from the markets in terms of direction as the commodity is being pulled in opposite directions by supply and demand dynamics.
While producers have already adjusted output to account for lower seasonal purchases of heating commodities, stay-at-home orders are lifting household demand for natural gas. Still, warmer weather conditions are bound to set in soon and would likely weigh on these purchases as well.
The prospect of several states reopening could still keep demand supported in the meantime, along with improvements in overall market sentiment. Stocks and commodities are mostly in the green on expectations of more stimulus from central banks and governments as well.