Natural gas prices reversed course on Tuesday, diving 3%. This movement follows Monday’s breakout out, which saw prices rally 6%.
According to the National Oceanic Atmospheric Administration, the weather is expected to remain warmer than normal for the next 6-10 and 8-14 days. US production rose slightly last week.
Technical Analysis
Natural gas prices broke out, on Monday surging 6% but retraced 3% of the gains on Tuesday falling back toward the prior May high at 3.01. Target resistance is seen near the continuation contract highs in February at 3.31.
Additional support is seen near the 10-day moving average at 2.91. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.
The current reading on the fast stochastic is 45, down from 91 which reflects accelerating negative momentum. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal.
This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).
The weekly MACD has also generated a buy signal which means that the uptrend is solidly in place.
US Production Rises
US production increases slightly. According to data from the EIA, the average total supply of natural gas rose by 0.5% compared with the previous report week.
Dry natural gas production grew slightly by 0.2% compared with the previous report week to average 91.8 Bcf per day, or 3.6% higher than this time last year. Average net imports from Canada increased by 6.6% from last week.