Natural gas formed lower highs and found support around $6.530, creating a descending triangle on its hourly time frame. Price just bounced off the bottom of the triangle and might be in for another test of resistance.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that resistance is more likely to hold than to break. If selling momentum is strong enough, natural gas could tumble below the triangle support and drop by the same height as the chart pattern.
Stochastic has a bit more room to climb before reaching the overbought area, so bullish pressure could stay in play for a while longer. A break above the triangle top around $6.900 could be followed by a rally that’s the same height as the triangle.
RSI is on middle ground to reflect consolidation, barely offering strong directional clues at the moment.
Natural gas shrugged off the larger than expected increase of 103 Bcf in stockpiles versus analysts’ estimates of a 93 Bcf gain. This suggests that demand remains subdued as falling temperatures are dampening purchases of cooling commodities.
However, natural gas is able to enjoy some support from expectations of an energy crunch later in the year, as geopolitical tensions in Russia are on the rise again. Recall that the Nord Stream explosions have shown evidence of foul play, leading investors to believe that the country is purposely restricting access to its pipelines.
This could mean that Europe might find it more challenging to secure enough natural gas for the winter season, likely bidding the commodity higher in order to get more supply during the colder months. This might deplete domestic LNG inventories, putting additional upside pressure on prices later on.