Natural Gas (NATGAS/USD) Price Technical Analysis for Oct. 27, 2021

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Natural gas might be in for a stronger rally, as price is forming an inverted head and shoulders pattern on its hourly chart. Price has yet to test and break past the neckline around $6.000 to confirm the uptrend.

The 100 SMA just crossed above the 200 SMA to confirm that the path of least resistance is to the upside or that resistance is more likely to break than to hold. In that case, natural gas could climb by the same height as the chart formation, which spans around $1.00.

Price is also trading above both moving averages, so these could hold as dynamic support around the $5.500 area on dips.

Stochastic is on the move up to show that buyers are in control of price action, and the oscillator has room to climb before reaching the overbought area. RSI is turning higher to signal a return in bullish pressure, so price could follow suit until overbought conditions are met.

Natural gas prices remain elevated, as weather forecasts predict a cooler winter season than usual. This could drive up purchases of heating commodities at the end of the year onto early next year, along with stockpiling demand.

Note that the energy crunch is still in play all over the globe, as rising demand from businesses resuming normal operations meets crippled supply from weather disruptions. This could drive consumers to make purchases in advance in order to brace themselves for potentially higher prices much later on.

The upcoming inventory report from the Department of Energy should shed more light on supply and demand conditions. A large draw in stockpiles might mean another run up for natural gas prices since this would reinforce the view that demand is already surging early on. On the other hand, an increase in inventories might signal that supply is starting to recover.

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