Natural Gas Range Bound Before The Downtrend Begins

Natural Gas futures on the NYMEX fell significantly during the week, closing 14.4% lower than a week ago at $2.89. The January contract fell hard also, it is now well into a negative spread since August, at $3.03. May contract currently trading at $2.77. EIA confirmed on Thursday the first withdrawal of the season of 36 Bcf for the week ended Oct. 30. Inventory currently at 3,919 Bcf, 5.4% higher y/y, 5.4% above the 5-year average.

We have been anticipating the first negative legs of a potential post-winter downtrend coming earlier this season, we have been waiting for a Daily MACD bearish crossing and it is the case since last Tuesday, as the latest uptrend has been losing momentum early since the November contract was trading in larger volumes. We are now expecting some kind of a bounce and range bound behavior is to follow for the next few weeks as colder weather will offer some kind of support. The above will make us sell rallies with even more confidence shortly. Heating demand rises in the residential and commercial sectors but remains flat in the industrial sector. Another selling opportunity will arise a little bit higher. We are buying and selling on the near term charts. 15min MACD swings related to RSI and trading volumes are the best in helping us identify profitable legs on directional trading. We remain vigilant as price is close to a seasonal ceiling. Downtrend is to follow when shoulder contracts will be trading in larger volumes.

We anticipate new curfews across the Lower 48 because of COVID cases resurgence. In the coming weeks we will have a better visibility on the new President-elect vision for the overall oil and gas industry's consolidation. Clarifications on that matter will also come from the Banks' perspective. U.S. macro data and the Dollar Index to be routinely monitored.  Daily, 4hour, 15min MACD and RSI pointing entry areas.