A breakout above $6.667 on Wednesday could ignite an eruptive move in natural gas prices before this week's closing. The bears look busy selling, but a sustainable move above $6.667 would be the primary indication of a short-covering rally in today’s trading session.
The volatility could extend manifold after the announcement of weekly inventory this Thursday as the bullish consolidation is about to complete on Wednesday after the reversal from the psychological support at $6 which was strong enough to ensure the continuity of bullish sentiments.
In a weekly chart, this week’s candle shows a strong surge in buying well below the current level despite growing selling pressure as natural gas has tested the 26 DMA, which is a strong resistance in the weekly chart.
In a daily chart, natural gas has formed a base at $6.236 and looks ready to sustain above the immediate resistance at $6.539 before heading towards the next resistance at $6.831. A sustainable move above this resistance could push natural gas above $7.340 in a day or two.
In an hourly chart, natural gas is currently trading well above the 26 DMA and looks ready to complete the formation of a ‘bullish crossover’ shortly.
The bulls could take advantage of the supply squeeze in different parts of the world and the change in weather outlook. The thick presence of big bulls between the levels of $6.2 - $6.4 could aid this rally.
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 in the world.