Natural gas is trending higher on its 1-hour chart but seems to have had a shallow pullback and is gaining traction on its climb again. In that case, price could make its way up to the next upside targets marked by the Fibonacci extension tool.
The 100 SMA is above the 200 SMA to confirm that the uptrend is more likely to carry on than to reverse, and the faster-moving MA held as dynamic support. The gap between the moving averages is also widening to reflect strengthening bullish momentum. A larger pullback could still reach the trend line support around $2.800 that lines up with the 200 SMA dynamic inflection point.
However, price is already testing the 38.2% Fibonacci extension around $2.900 and a break above this could set off a test of the 50% extension that lines up with the swing high. Sustained bullish pressure could take it up to the 61.8% level at $2.944 or the 76.4% extension at $2.976. The full extension is at $3.027.
Stochastic is heading up to confirm that buyers have the upper hand, but the oscillator is closing in on the overbought zone to signal exhaustion. Turning lower would mean that sellers would return and possibly push for another dip. RSI appears to be topping out without reaching the overbought area, suggesting that bearish momentum is brewing.
Natural gas is now drawing support from rising temperatures as summer is rolling in and purchases of cooling commodities could pick up. According to Natural Gas Intelligence, a slew of pipeline maintenance events in the Northeast resulted in a 2.4 Bcf day/day drop in production, so supply is limited.
In addition, Wood Mackenzie, a natural resources research and consulting firm, reported that an unannounced operator field maintenance also likely contributed to the decline in output. The upcoming inventory report should shed more light on supply conditions.