Analyzing the movements of the natural gas futures since Apr. 28, I find that they bounced back after testing the lows at $2.874 despite the lesser demand and surging inventory levels due to the spring season.
Undoubtedly, this was a technical reversal that pushed the natural gas futures to test the significant resistance at $3.810, likely to slide again due to the delayed summer demand this year.
No doubt that national demand will be stronger in the days ahead due to a record-breaking heat set up over Texas, but the rest of the U.S. will be mostly comfortable with highs of 60s to 80s, indicating a surge in weakness in national demand this time, according to natgasweather.com reports.
Secondly, the inventory announcement this week could indicate a surge in inventory levels, which will extend a fresh selling spree this week.
Technical Levels to Watch
In the daily chart, natural gas futures are trying to hold significant support at 50 EMA (Exponential Moving Average) at $3.602 after testing a high at $3.847 on Monday, indicating the quantum of bearish pressure at the current levels.
Undoubtedly, a breakdown below this significant support at 50 EMA could push the natural gas futures to defend the next support at 20 EMA at $3.524 amid low volumes.
I anticipate that if the natural gas futures do not hold this support, the next target will be at 200 EMA at $3.269 on Tuesday.
Inversely, if the natural gas futures hold above the significant support at 100 EMA at $3.574 on Wednesday, bulls could try to push the natural gas futures to test the significant resistance at $3.810, which will attract big bears to load fresh shorts once again.
In 1 Hr. Chart, natural gas futures are trying to defend the significant support at 200 EMA, but the formations of bearish crossovers indicate a selling spree likely to start any time in today’s session.
Undoubtedly, a breakdown by the natural gas futures below this significant support will extend selling pressure this week, which could push the natural gas futures to test the lows at $3.350 before this week’s closing.
Disclaimer: Readers are advised to take any position in natural gas futures at their own risk as this analysis is based only on the observations.