Natural gas recently broke below an ascending channel to signal that a reversal from the uptrend is due. Price appears to be completing its retest to the area of interest and might be ready to resume the slide from here.
Applying the Fibonacci extension tool shows how low price could go from here. The 61.8% level lines up with the swing low that might serve as the first take-profit point around $2.761. Stronger selling pressure could take it down to the 78.6% level at $2.737 or the full extension at $2.708.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the reversal is more likely to gain traction than to reverse. Then again, the faster MA is turning back up and narrowing the gap with the 200 SMA to suggest weakening selling pressure.
RSI is pointing down after reaching the overbought zone to signal exhaustion among buyers and a return in bearish pressure. Stochastic is also in the overbought zone and looks ready to head back down to indicate that sellers are about to return.
Natural gas seems to be drawing support from news that demand could pick up on a trade deal between the US and China. Although output remains elevated while demand could slide in the warmer months, this commodity could still find a market outside the US.
Newswires are reporting that a trade deal could guarantee increased purchases of commodities by China, as well as improved business sentiment. In turn, this usually translates to stronger demand for energy commodities and an overall improvement in market risk appetite. Further developments could stoke gains while resurfacing tensions could allow the selloff to resume.
Meanwhile, weather forecasts are still signaling some cold temperatures in a few areas but the fact remains that spring months seasonally amount to lower demand for heating supplies.