Natural gas is trading sideways as it bounced off resistance at $2.350 and looks ready to test support at $2.200. A bounce off this level could take price back up to the top of the range or at least halfway through.
The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside. In other words, support is more likely to hold than to break. Then again, the gap between the indicators is narrowing to reflect weakening bullish momentum and a potential bearish crossover.
RSI is turning up to show that buyers are returning and could already allow a bounce to happen from here. Stochastic is also turning back up to show that bullish momentum is starting to pick up.
Weather disturbances that were expected to result to some form of disruption in natural gas production didn’t really materialize over the weekend, leading traders to price in a continued increase in supply. Demand has yet to pick up as cooler weather conditions set in across the country, so the upcoming inventory data should shed more light on how these dynamics play out.
Persistent geopolitical risks are also weighing commodities lower in general as the uncertainty could keep dampening business optimism and therefore demand for energy assets. Brexit developments are worth watching in the days ahead, along with updates on the US-China trade talks, as this could dictate how market sentiment might fare.
Market players seem to be betting on more natural gas price declines. The latest COT report revealed that hedge funds added 26K contracts to short position while reducing long position in futures and options by 1.1K contracts. Current open interest shows that managed money is now short 301K contracts compared to long 105K contracts.