Natural gas continues to trend higher but there are signs that the climb is slowing. Technical indicators are giving mixed signals on whether the uptrend could carry on from here or not.
The 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside or that support is more likely to hold than to break. The 100 SMA dynamic inflection point also lines up with the trend line support to add to its strength as a floor. However, the gap between the moving averages is narrowing to reflect weakening bullish momentum and a potential bearish crossover.
Stochastic is still heading higher, but the oscillator is approaching the overbought zone to signal exhaustion among buyers. Turning lower could mean that selling pressure is about to return and that a break of the trend line is due. Price would need to dip below the 200 SMA dynamic inflection point as additional confirmation of a reversal.
RSI is already turning lower without reaching the overbought zone. Then again, the oscillator appears to be moving sideways to reflect consolidation.
Natural gas traders would likely take cues from the inventory report from the Department of Energy, which is slated to show a build of 68 Bcf, larger than the earlier increase of 15 Bcf. This would be indicative of weaker demand likely due to warmer weather conditions weighing on purchases of heating commodities.
Then again, natural gas is also used for cooling, so higher temperatures in the coming months might drive up demand. Risk appetite could also give a boost for commodities in general, as traders focus on more optimistic monetary policy statements and economic data improvements.
The BOE decision and NFP report are worth watching when it comes to gauging market sentiment. Tapering from the UK central bank could boost investor confidence, along with another strong gain in US jobs.