Natural Gas: Momentum Takes A U-Turn
Satendra Singh | Sep 18, 2021 01:17PM ET
On Sept. 15, 2021, Natural Gas futures tested a seven-year peak at $5.644I amid continuous inflow of supportive weather news, while the Natural Gas bulls were sustaining above the psychological resistance at $5 since Sept. 12, after finding a breakout above the psychological resistance.
The next day, Sept. 16, the bulls didn't want to surrender so easily here as everything was in their favor to sustain the above psychological resistance that has now been turned into psychological support; attempted to bump once again and tested a high at $5.594. But, natural gas bulls were looking exhausted on Friday in the absence of a fresh inflow of supportive news and finally started to move downward in a hurry from the day’s high at $5.392 that has turned into an immediate resistance above $5.
Undoubtedly, Natural Gas Futures are at much higher pricing than is typical for this time of the year, and as a result, normalcy would appear to be making an come back, given enough time, but we have to be cautious at this point, since we are still one month away from the end of Hurricane Season, which generally starts from June 1 and continues up to Nov. 30.
The $5.00 level will attract a lot of headline attention, just as the $4.50 level will, with the $4.00 level the absolute floor in the market. A break below, and the market collapses. All things being equal, this is a market that will struggle to go higher from here, and even if there is a turn around rally from here, longer-term traders would then focus on the fact that the headlines have gotten far ahead of the reality.
At time of writing, Tropical Storm Odette had formed off the U.S. mid-Atlantic coast, the National Hurricane Center (NHC) said in its latest advisory on Friday. Odette was located about 325 miles (525 km) south-southwest of Nantucket, Massachusetts, packing maximum sustained winds of 40 miles per hour (65 km per hour), the Miami-based weather forecaster said.
"Strengthening is forecast during the next couple of days, and Odette is expected to become a strong post-tropical low by Saturday night."
The restoration of natural gas rigs is in the final stages, with some having started production. Secondly, the consecutive increase in weekly injection looks evident enough to surge bearish pressure on natural gas prices.
Technically, the formation of the ‘Exhaustive Weekly Candle' looked evident enough to surge a selling spree during the upcoming week. Should the Natural Gas futures start the week with a gap-down opening, that will be confirmation of the continuation of a steep slide amid growing volatility during the upcoming weeks.
I've mentioned the possibility of repetition of 2018's moves in my previous analysis ‘Natural Gas Resuming Momentum, Before A Seasonal Peak,’ when natural gas started its first breakout in June 2021. Once again, similar volatile moves that tested the 2018 peak are are occurring now, which could continue onward. Natural gas futures witnessed a steep reversal of approximately $0.658 after testing a peak at $5.934 during the second week of Nov. 2018. They could see a low of $4.986 after testing the seven-year peak of $5.644 hit last week.
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The upcoming week could find Natural Gas futures repeating the volatile moves that occurred during the second week of Nov. 2018—$4.866 to $4.126—which could also be repeated during the fourth week of Sept. 2021. The current situation looks alarming for the natural gas price level, before the advent of a final directional move during the upcoming week.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.
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