Natural gas recently broke out of its descending trend line to signal that a reversal from the slide may be in the works. Price also busted through a short-term ascending channel to signal that a steeper rally is in the works.
However, the 100 SMA is still below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the downtrend is more likely to resume than to reverse. Then again, price has moved above the 100 SMA dynamic inflection point as an early indicator of bullish momentum.
RSI is already indicating overbought conditions, though, or that buyers are tired. Turning lower could bring a return in selling pressure that might spur a pullback to the broken trend line. Stochastic is also in the overbought zone to signal exhaustion among buyers.
Still, natural gas is enjoying a lot of support these days as a report indicated that coal is flaming out in West Virginia so there could be renewed demand for alternatives instead.
According to Woody Thrasher, the state’s former commerce secretary and the owner of Thrasher Engineering:
“We mine met coal but make no steel. We cut trees but make no furniture. Let’s make West Virginia a better place to locate. There is an abundance of land that is not occupied and in close proximity to where those (oil and gas) resources are. We need to create opportunity zones.”
The prospect of the Fed keeping rates on hold for much longer than previously anticipated is also likely fueling commodity gains. After all, businesses could have an improved outlook also following the outcome of US-China trade talks and translate this to stronger demand for energy.