Natural gas has formed higher lows and higher highs on its 4-hour chart, and price is currently bouncing off the mid-channel area of interest at $2.500. A continuation of the climb could take price up to the Fib extension levels next.
The 50% level lines up with the swing high around $2.800 while the 61.8% extension is close to the channel resistance at $2.8670. Stronger bullish momentum could take natural gas up to the 78.6% level at $2.968 or the full extension at $3.094.
The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside or that the climb is more likely to gain traction than to reverse. However, price has fallen below the 100 SMA dynamic inflection point to signal that bearish pressure is returning. A larger pullback could take natural gas down to the channel bottom around $2.400 or at least until the 200 SMA dynamic inflection point.
RSI is already turning higher, though, and is about to cross the center line to signal that a pickup in bullish momentum is due. Stochastic is also moving higher so price could follow suit, but the oscillator is already testing the overbought region.
Natural gas got a strong boost from upgraded forecasts from the Energy Information Administration, which projected the commodity to average $2.61 per million British thermal units this year, up 1.6% from the previous forecast. However, the EIA also estimated that next year prices will average at $2.480, which is down 1.3% from the previous forecast.
Up next, weather forecasts in the next week or two could impact natural gas trends and whether the climb could resume from current levels or if a deeper pullback is due. Expectations of cooler temperatures could prove bullish for the commodity as it would spur demand for heating supplies.