Natural gas is back to correction mode, as price is retreating to the 61.8% Fibonacci retracement level once more. This lines up with an area of interest around the $5.500 mark.

In addition, the former resistance turned support level coincides with the 100 SMA dynamic support. This moving average is above the slower-moving 200 SMA, confirming that the path of least resistance is still to the upside.

In other words, support levels are still more likely to hold than to break. In that case, natural gas could resume the climb back to the swing high at $6.425.

However, price is dipping below the 100 SMA as an early indicator of bearish pressure. Still, the 200 SMA might hold as dynamic support around the $5.000 major psychological level.

Stochastic is already indicating oversold conditions or exhaustion among sellers, so turning back up would mean that buyers are returning. RSI has more room to move south, so price could follow suit until oversold conditions are met.

Natural gas gave up some ground as temperatures continue to drop, likely weighing on short-term demand for heating commodities. However, the longer-term outlook remains bullish for the commodity since supply shortages all over the globe are being reported.

At the same time, demand for energy commodities is on the rise now that COVID-19 concerns are easing. This is driving up business and consumer activity, which could lead to stronger purchases of natural gas as winter season draws closer.

The upcoming inventory report would shed more light on supply and demand conditions, although any build might be taken with a grain of salt. After all, summer is officially over in the US and purchases of cooling commodities have dropped significantly.

A draw would confirm that supply remains limited after weather disturbances disrupted some production activity across major facilities.