Natural Gas May Be At The End Of The Bull-Run
Suyog Chandak | May 21, 2017 11:47AM ET
CRUDE OIL:
Crude oil had an extremely strong week where it has closed near highs. There was an inside week, last week, which broke to the upside at 48.3. The moving averages on the weekly have caught up and there seems to be suggestion of crude continuing its journey higher.
There was some good price action throughout the week.
On Monday, there was news of a possibility of another cut by Russia and China which propelled crude oil prices higher. Throughout the week, the moving averages were lined to the base of the candles which is usually a good sign for an upward trend. While, Oil is slightly extended on the daily, there could be a minor digestion before it moves higher.
With increased OPEC activity over the past 6 months, it would not be surprising if OPEC announces another cut which could spur oil prices towards the $58-$62 region where some resistance lies.
For the shorter term, I expect oil to move towards 51.5 where a minor correction would occur.
There have been several opportunities to buy oil (numbered on the chart below).
Next week, I would expect crude oil to move towards $51.5-$52 where it might face some resistance.
NATURAL GAS
Natural Gas, after an extremely strong previous week gapped down on Monday Morning and never looked back again. There was a continuous sell-off right until Wednesday, where Natural gas sold off as much as 7% over the 3 day period.
Whenever, something showing strength and gaps down, it could mean the end of the bull-run.
On the weekly chart for Natural Gas, we have an inside week with healthy tails but contradicting candles. If Natural Gas wants to move higher, $3.5 needs to be broken. Below is the weekly chart for Natural Gas.
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On the daily chart, what we see is confusion and some range-bound action. While, Natural Gas tried to break away from the range, this entire week brought it right back in it. By the looks of it Natural Gas could be headed lower. There has been price rejection at important points whenever it moves higher.
Such behavior is typical before a move lower.
It is important to go short only once important levels are broken.
I see opportunity going short below this week’s low near 3.16 for a move towards $3 and later towards $2.85. It is also to be noted that we might see a Head and Shoulder on the daily in the coming week.
It would be crucial to see what Natural Gas does for the next week in order to determine direction.
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