Upon analyzing the movements of natural gas futures since my last analysis, it appears that these futures have encountered renewed bearish pressure following Trump's inauguration.
President Donald Trump's declaration of a national energy emergency in the US seems to be the primary reason for this shift. The gap-down opening of natural gas this week confirms the significance of this resistance, with prices stabilizing at a resistance level of $3.915.
On the other hand, a bearish outlook for the upcoming week due to the forecast of milder February weather and a resurgence of supply could negate the impact of the national energy emergency order that could create a supply crunch at this time of the year.
Secondly, I find that the appearance of price exhaustion in natural gas futures despite the appearance of bullish technical signals suggests that the fall could be deeper amid growing concerns over the impact of such an energy emergency.
However, the upcoming weekly inventory could confirm this bearishness this Thursday with the announcement of a turbulent decline in withdrawal levels.
Technical Levels to Watch
In the daily chart: Natural gas futures, showing the formation of a ‘bearish candle’ due to the formation of a ‘candle’ on the first trading session confirms a breakdown below the immediate support at 50 DMA at $3.422.
Currently, natural gas futures are at a crucial juncture, hovering just below the 20 DMA at $3.780. This suggests increased bearish pressure, potentially driving natural gas futures lower this week, especially if the inventory announcement triggers selling sprees through the end of the month.
In the 4 Hr. Chart: Natural gas futures are indicating extreme bearishness after the formation of a ‘Bearish Crossover’ by a downward move by the 9 DMA below the 50 DMA, indicating a surge in bearish pressure.
Simultaneously, the formation of three outside bearish candles indicates this bearishness could surge more this week as the futures are currently trading below the 100 DMA at $3.783.
Take Away for the Traders
Natural gas could experience a steep decline, potentially testing the $3.093 level this month if it fails to hold above the significant support at the 50 DMA of $3.148.
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Disclaimer: Readers are advised to take any position in natural gas at their own risk as this analysis is only based on the observations.