Natural Gas Price Prediction – Prices Whipsaw Forming Outside Day

David Becker
·2-min read

Natural gas prices moved lower on Thursday after hitting a 3-month high earlier in the trading session. Prices generated an outside day which is generally a signal of a temporary top.  This followed a slightly larger than expected rise in natural gas inventories according to the EIA. The weather in the US is expected to be warmer than normal for the next 6-10 and 8-14 days. There is no tropical cyclone activity expected in the Atlantic Ocean or the Gulf of Mexico over the next 48-hours according to NOAA.

Technical Analysis

Natural gas prices formed an outside day, making a higher high a lower low and a lower close which is generally a reversal signal. Prices have rallied 27% from their lows 4-days ago, which is one of the largest rallies seen in 2020 over such a short period. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 81, above the overbought trigger level of 80, which could foreshadow a correction. Medium-term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with a positive slope which points to consolidation.

Inventories Rose Slightly More than Expected

Natural gas in storage was 3,274 Bcf as of Friday, July 31, 2020, according to the EIA. This represents a net increase of 33 Bcf from the previous week. Expectations were for a 31 Bcf build according to survey provider Estimize. Stocks were 601 Bcf higher than last year at this time and 429 Bcf above the five-year average of 2,845 Bcf. At 3,274 Bcf, total working gas is within the five-year historical range.

This article was originally posted on FX Empire

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