Natural Gas: Monster Monday, Tumbling Tuesday, Wobbling Wednesday In The Offing
Satendra Singh | Jan 23, 2022 09:36AM ET
The natural gas futures showed a sharp pullback last Friday after witnessing a steep slide during the whole week. A reversal is still intact to test the winter’s peak, which the natural gas traders are bound to ignore amid the shifting weather outlook during the last three weeks. The analysts still feel that the winters will punish the bears sometime in March.
In general, the traders do not agree with this phenomenon at this time of the year while they trade the February contract, which is due for rollover on Jan. 27.
Last Friday, the natural gas futures were struggling to cross $4.334 since Jan. 14 after a steep fall from $4.873, tested on Jan. 12. I felt that the bears did not want to stop at $4.334, returned with full strength on Jan. 19 to keep control amid growing noises on the warm weather outlook.
Once again, natural gas futures tested the low at $3.786 on Jan. 20. After consolidation in a tight range, well below $3.874 on Jan. 20, the natural gas futures found the entry of big bulls. They were looking too reluctant to thrash bears with the supportive weekly withdrawal of -206 Bcf and a shift in the sudden increase in the national demand for natural gas during that week due to shifting weather scenarios all over the US.
Natural gas started the week above $3.869, and the bulls made this level a strong base before proceeding further as this upward journey was not so easy for the bulls. The bears were too busy selling every upward move, but finally, the bulls commanded the scenario and found a breakthrough above the psychological resistance at $4.
This breakthrough looks evident enough for a steep upward move that may start during the upcoming week with a gap-up opening on the first trading session. If so, prices could see a monster move on Monday.
Undoubtedly, Tuesday could see a tumbledown followed by wobbling on Wednesday. Thursday could see the thrusting moves by both the bears and the bulls to pull the natural gas prices in their favor. As usual, Friday could be frisky as the traders prefer to focus weather outlook for weekends.
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Technically, the natural gas futures could see high volatility during the upcoming week in the range of $3.888 to $5.128. Bulls could influence the overall scenario by keeping the natural gas prices above $4.424. Big bears could show their strength to sell rallies above $4.776. Natural gas futures could feel the shifting weather outlooks for the week that could continue to increase volatility.
Last Friday, the natural gas futures closed the week, just at the same level, from where the advent of a steep upward move started in January 2014 that ensures a monster step by the natural gas futures on upcoming Monday. If natural gas starts the day with a gap up above $4.075, this monster move could push the natural gas futures to test $4.268 on Monday, which could find an equally forcible sell-off on Tuesday.
Over-reactionary moves on Monday and Tuesday may increase volatility on Wednesday, seeing extended moves on both sides. Thursday, both the bulls and bears could remain busy in covering their positions as the rollover is there of February contracts. Friday could see bullish moves again due to the thick presence of natural gas bulls.
Last Friday, the natural gas prices rebounded, rising 5% but finished the week down more than 7%. This has left some space for the natural gas bulls to fill this loss on the first trading session of the upcoming week. The 200 Days Moving Average should continue to be stiff resistance.
I find that once the natural gas futures find a breakout above this immediate resistance, this resistance could turn into strong support for the natural gas futures during the upcoming weeks. A gap up opening on the first trading session can throw the price above 200 DMA in a single stretch will provide a further clue about the bulls’ intention.
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 in the world.
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