Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: Natural Gas Price Drop Just Profit-Taking; Trend Remains Higher

By Investing.com (Pinchas Cohen/Investing.com)CommoditiesOct 19, 2021 09:31
ca.investing.com/analysis/chart-of-the-day-natural-gas-price-drop-just-profittaking-trend-remains-higher-200490956
Chart Of The Day: Natural Gas Price Drop Just Profit-Taking; Trend Remains Higher
By Investing.com (Pinchas Cohen/Investing.com)   |  Oct 19, 2021 09:31
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Natural Gas futures plummeted 7.8% on Monday, following Friday's 4.9% drop. The price of the commodity is currently fluctuating as traders attempt to grasp where the commodity will head next after its two-day selloff that included the breakout of a 3-week range.

Two pieces of news hit traders on Monday, with oppositional impacts. Weather models over the weekend revealed no cold spells in the short-term and the absence of chilly weather means lower demand for the energy commodity than anticipated, a bearish development.

However, Moscow decided not to boost its promised natural gas shipments to Europe, even after President Vladimir Putin suggested he would. More limited supply than expected is bullish for the price of NatGas.

Still, the sell-off didn't reverse. We derive two insights from this. First, even though bears had a weekend during which to cool off, they decided to increase their attack. More important however, the selloff started ahead of the weekend, even before the weather models showing a warmer-than-anticipated autumn were released.

We can't help but wonder, therefore, if what we're seeing is a demonstration that prices of the already 'hot' commodity—that's recently been trading at record highs—were already ripe for profit-taking.

NatGas Daily
NatGas Daily

The contract just completed a small H&S top, only three weeks in the making. However, that could have been long enough to warrant a correction within the uptrend.

Because the most recent uptrend line, since the Aug. 19 low, had been breached it would make sense to expect the price to fall toward the next support line since the April low.

But there's still a broader uptrend in play. The earliest trendline is from the late-June 2020 bottom. That makes this recent, shorter trendline the third within the broader uptrend.

Usually, the price corrects after three escalating uptrends, as is the case here. We expect the dip to be temporary though. As long as the uptrend remains intact, we anticipate natural gas to hold and possibly even turn higher after a short-term drop.

Both the MACD, a comparison of different price averages and their interplay, and the RSI, which measures changes in momentum, have turned around. This demonstrates broad weakness across price and the speed at which the price changes.

However, as we expect this to be a short-term dip, fueled by profit-taking, we see the major moving averages are holding up for now.

Determining where they are on the chart can help gauge where the bullish strongholds are. The 200 DMA is guarding the original uptrend line. The 100 DMA is realigning with the second uptrend. Finally, the 50 DMA—which could not keep up with the rapid ascent of the third uptrend—is, nevertheless, supporting the price for now.

Note that as the 50 DMA could not maintain the rally's dizzying speed, it wasn't sustainable.

Trading Strategies

Conservative traders should wait for the price to retest the neckline, demonstrating ongoing supply.

Moderate traders, too, would wait for a return move, for a better entry, if not a bearish confirmation.

Aggressive traders could enter a long contrarian position, counting on a bounce that follows a short cover—as the hourly chart develops an H&S bottom— provided they accept the higher risk that goes along with the higher hoped-for rewards. Money management is crucial for survival.

Contract Specs

  • Contract Unit: 10,000 MMBtu (Metric Million British Thermal Unit)
  • Price Quote is in US dollars and cents per MMBtu
  • Value of each tick: $10.00

Here's an example of just one way to handle an aggressive trade. Note that it's not fortune-telling. Even the most carefully plotted trade can fail:

Trade Sample

  • Entry: 5.000
  • Stop-Loss: 4.900
  • Risk: $1,000
  • Target: 5.300
  • Reward: $3000
  • Risk:Reward Ratio: 1:3
Chart Of The Day: Natural Gas Price Drop Just Profit-Taking; Trend Remains Higher
 

Related Articles

Andy Hecht
Oil Correction: An Opportunity For 2022 By Andy Hecht - Dec 03, 2021 2

This article was written exclusively for Investing.com The stairs higher and an elevator lower The crude oil trend remains higher - Higher lows on the horizon US energy policy...

Chart Of The Day: Natural Gas Price Drop Just Profit-Taking; Trend Remains Higher

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email