Natural gas fell through the bottom of its descending triangle on the hourly time frame, indicating that a short-term selloff is in the works. Price is in the middle of a correction and the potential resistance levels are marked below.
The 38.2% Fib is in line with the broken triangle bottom, which might hold as resistance moving forward. A larger pullback could reach the 50% level at $6.583 or the 61.8% level that’s in line with the 100 SMA dynamic inflection point.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. However, stochastic still has a bit of room to climb, which means that there’s some bullish pressure left for a higher pullback.
RSI is also heading higher and is just halfway through on its move up to the overbought region. This suggests that buyers still have the upper hand and could keep the correction going until sellers are ready to take over.
Natural gas broke lower as risk-off flows picked up and investors are pricing in weaker demand levels for the upcoming inventory report. Note that lower temperatures likely weighed on purchases of the cooling commodity in the past week and could continue to keep demand in check for a while.
In the previous report, natural gas stockpiles rose by 103 Bcf, so a higher increase in inventories would confirm slower purchases or rising production.
However, the commodity might be able to find a bottom soon since supply is expected to remain tight while geopolitical tensions from Russia persist. Bullish pressures could come in play as winter season draws near since investors are on the lookout for another energy crunch while purchases of heating commodities advance.