Natural Gas futures witnessed a sell-off soon after the announcement of weekly inventory last Thursday, which showed an addition of 4bcf to supplies. The selling spree continued last Friday after the announcement of Baker-Hughes rigs count that showed a significant jump in rigs by 11 during the week.
I find that the expectations of changing weather outlook resulted in a gap opening this week. According to natgasweather.com reports,
"Hot high pressure will rule the southern, western, and eastern U.S. with highs of upper 80s to 100s for strong demand, hottest California to Texas. The Midwest/Great Lakes will be comfortable as weather systems sweep through with showers and highs of 70s to mid-80s from July 11-17."
On observing the movements of futures in different time frames, I find that it could take a significant upward move despite some odds on the supply and demand fronts. I conclude that a sustainable move above $3.2 will be the first confirmation of this breakout, possibly during this week.
In the 1-hour chart, futures are showing good strength on Tuesday since the weekly opening with a gap-up. After finding significant buying support at $2.547 on July 7th, 2023, a reversal above $2.718 enhanced the expectations of the bulls to hit their immediate target at $3 as futures are sustaining above the 200 DMA after the formation of a bullish crossover.
In the 4-hour, chart, natural gas futures are sustaining above the weekly opening gap on Tuesday, as the formation of a bullish crossover looks evident enough to keep the prices in an uptrend zone - which futures have been maintaining since June 2, 2023, when they hit a low at $2.140.
Finally, I conclude that any downward move by natural gas futures will provide an opportunity to go long above $2.548. On the other hand, an upward swing above $3.5 will be an opportunity to sell.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. All the readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities in the world.