Natural gas broke below the rising wedge formation previously highlighted as a sign that bearish momentum is taking over. Price might still need to make a correction to the broken support area or the Fib levels before continuing its slide.
Applying the Fibonacci retracement tool shows that the 61.8% level is closest to the broken wedge bottom at $2.626 and is also in line with the 100 SMA dynamic inflection point. This is still above the longer-term 200 SMA, though, so the path of least resistance is to the upside. In other words, there might still be a chance for the climb to resume from here. Price is trading above the 200 SMA dynamic support, so this could keep losses in check around $2.570.
RSI is pointing up to show that buyers are taking over while sellers take a break. This oscillator has yet to cross the center line to reflect the presence of a bullish trend. Stochastic is also pulling up from the oversold region to suggest that buyers are taking over while sellers take a break. If any of the Fibs hold as resistance, natural gas could resume the drop to the swing low or lower.
Natural gas appears to be caving to risk-off flows which have been in play for the better part of the previous week after Trump threatened more tariffs on China. This dampens business outlook and therefore weighs on their purchases of energy commodities.
Warmer weather conditions also seem to be setting in and weighing on demand for heating supplies like natural gas. The Energy Department’s latest report showed an increase that’s in line with expectations as stockpiles held in underground storage in the lower 48 states rose by 85 billion cubic feet for the week ended May 3, but this was higher than the five-year average net injection of 72 billion cubic feet.