Natural Gas: Double Top Could Attract Big Bears

On Monday, natural gas futures showed a monster move as I pointed out some technical formations before the advent of price reversal by the natural gas.

On Tuesday, the futures traded in a tight range from $8.698 to $9.011 as this seems to be a turning point for futures due to the occurrence of some price exhaustion after a sudden steep surge.

Undoubtedly storage phobia among the European countries is still intact since the European Union plans to start jointly buying gas before winter, the bloc's energy policy chief said on Monday, as it seeks to cut reliance on Russian fossil fuels and build a buffer against further energy supply shocks.

On the other hand, the futures have been trading at a crucial juncture that could continue to increase price volatility as the traders could turn aggressive once they find a definite clue about the next breakout above $9.316 or a breakdown below $8.282.

Futures could remain choppy till this weekly closing as traders are looking for some clue from the upcoming inventory on Thursday.

Technically speaking, in a weekly chart, futures are trading near completion of a double top that could result in a sudden sell-off as they are facing resistance above the recent high at $8.989 during the first week of May 2022.

In a daily chart, futures are currently trading at $8.917 after testing the day’s high at $8.982, and the day’s low at $8.805 looks evident enough to show exhaustion. Undoubtedly, a breakdown below $8 could turn the current trend in favor of the natural gas bears.

In the hourly chart, bearish scenario becomes more visible as the two exhaustive candles have already formed during the last two hours. Undoubtedly, the current position is still above the bullish crossover, but a sustainable move below 26 DMA, currently at $8.853, will confirm the advent of a breakdown.

Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.