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Natural Gas Price Futures (NG) Technical Analysis – Will Seasonal Pressure Force Shorts to Cover?

James Hyerczyk

Natural gas futures finished lower on Friday and inside the previous day’s range. The price action suggests investor indecision and impending volatility. The rally the previous day was likely fueled by aggressive short-covering as traders continued to exit positions following the expiration of the September futures contract.

Although some investors tried to pin the rally on concerns over Hurricane Dorian, this was not the case, since the storm remained well out in the West Atlantic and was nowhere near any natural gas production located in the Gulf of Mexico near Louisiana and Texas. The key issue for traders over the near-term is whether some of the massive amount of shorts will continue to press the market lower, or will they start to cover in early September like the seasonality charts show.

On Friday, October natural gas settled at $2.285, down $0.011 or -0.48%.

Daily October Natural Gas

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on August 29 when buyers took out the previous main top at $2.273. However, the lack of follow-through to the upside suggests the move was likely fueled by the triggering of buy stops rather than aggressive new buying. The main trend will change to down on a trade through $2.126.

The main range is $2.510. Its retracement zone at $2.278 to $2.332 is the nearest upside target. This zone is controlling the near-term direction of the market.

The short-term range is $2.126 to $2.310. Its retracement zone is $2.218 to $2.196 is potential support.

The intermediate range is $2.045 to $2.310. Its retracement zone at $2.178 to $2.146 is additional support.

Daily Swing Chart Technical Forecast

Based on Friday’s inside move and the close at $2.285, the direction of the October natural gas futures market on Tuesday is likely to be determined by trader reaction to the main 50% level at $2.278.

Bullish Scenario

A sustained move over $2.278 will indicate the presence of buyers. The first upside target is last week’s high at $2.310. Taking out this level could drive the market into the main Fibonacci level at $2.332 and the main top at $2.338. This price is a potential trigger point for an acceleration to the upside since the next major target is the July 10 main top at $2.510.

Bearish Scenario

A sustained move under $2.278 will signal the presence of sellers. If this creates enough downside momentum then look for a break into the short-term 50% level at $2.218, followed by the short-term Fibonacci level at $2.196.

The key support area is the intermediate retracement zone at $2.178 to $2.146, followed by the main bottom at $2.126.

This article was originally posted on FX Empire