Natural gas could be due for a reversal from its selloff as price broke above the channel top to show that buyers are gaining the upper hand. Price is also moving above a short-term rising trend line to reflect the presence of bullish momentum.

However, 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 downtrend is still more likely to resume than to reverse. The gap between the two is still widening to signal increased selling momentum, but price is above the 100 SMA dynamic inflection point which might hold as dynamic support.

RSI is hovering around the overbought zone to indicate that buyers might be exhausted and willing to let sellers take over. This could spur a pullback to the broken channel top right around the rising trend line support. Stochastic is also indicating overbought conditions and could be due to move south, so price might follow suit.

Natural gas appears to be drawing support from cooler weather conditions, both in forecasts and in actual. This could keep demand elevated for the time being, but there’s no stopping warmer months from setting in and possibly lasting longer than predicted as well.

Meanwhile, global supply is projected to increase as more producers compete for market share. The presence of risk-taking in general financial markets, however, has proved to be bullish for natural gas recently. Traders might also be anticipating a decline in stockpiles for the EIA report due this week.

According to Seeking Alpha:

“Seasonal buying, powerburn tightening, production levels lowered, increased LNG exports, and average to above average demand expected over the next couple of weeks (led by southern U.S. CDDs) resulted in natural gas prices trading higher on Wednesday.”