Natural gas is trending higher on its 1-hour time frame, moving above an ascending trend line that’s connected its lows since the start of the month. Price looks ready for a pullback to this support area soon.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, the uptrend is more likely to gain traction than to reverse.
The gap between the indicators is also widening to reflect that bullish momentum is picking up, and the 100 SMA is close to the 38.2% Fibonacci retracement level to add to its strength as support. A larger pullback could take price down to the 50% level at $2.521 or the 61.8% Fib that might be the line in the sand for a correction.
RSI is on the move down to show that sellers have the upper hand, but the indicator is already bottoming out to suggest that bearish pressure is weakening. Stochastic has reached the oversold region to signal that sellers are exhausted and that buyers could take over from here.
Additional volatility is expected for the commodity as hurricane season starts in the US and could wind up hurting production in key areas. At the same time, the “seasonal bounce” in natural gas has already gained traction as colder weather conditions are setting in, thereby boosting demand for heating commodities.
Improving market sentiment could also keep natural gas supported as trade tensions seem to be taking the back seat while negotiations resume. Signs that a deal could be struck could mean more upside for higher-yielding assets and commodities as this would shore up business sentiment and purchases.
The next catalyst is the inventory report from the Energy Information Administration, which is expected to show a draw of 85 Bcf.