Natural gas continues to trend higher on its 1-hour chart after breaking and retesting the mid-channel area of interest. Price is now closing in on the top of the channel, which might keep gains in check.
In that case, natural gas could retreat to the middle of the channel again or the bottom around the $2.900 mark. Stochastic is still heading higher, though, so price could follow suit until overbought conditions are met.
RSI looks ready to head south without reaching the overbought zone, suggesting that sellers are eager to take over. However, the 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the ceiling is more likely to break than to hold.
If that happens, natural gas could stage a steeper climb past the $3.000 major psychological resistance.
Natural gas drew support after the Department of Energy printed a better than expected inventory read for the previous week. Stockpiles were at 2,029 Bcf as of Friday, May 7, 2021, according to the EIA, which represents a net increase of 71 Bcf from the previous week.
In addition, the NOAA predicted that the weather is expected to be warmer than normal throughout most of the United States over the next 6-10 and 8-14 days. This could mean sustained demand for cooling commodities like natural gas, especially with shortages in other commodities like gasoline being reported in several US states.
The upcoming US retail sales release would likely have a strong impact on overall market sentiment, as a slowdown in consumer spending is eyed for April. A stronger than expected result could convince investors that the US economy is carrying on with its economic recovery, which could shore up demand for higher-yielding assets like commodities.