A sell off late last week by the October 14 natural gas contract found good buying interest at the lower-3.800 area in yesterday’s trade.
After bottoming out at a 3.804 early-morning low, the October contract moved back higher into the close settling at 3.850, up .013.
With the October contract holding above 10 week support between 3.740-3.800 on Monday, buying has come back in during the overnight session. The next upside resistance now becomes the 10 and 40 day moving averages which have converged at 3.905.
A rally above the 10 and 40 day moving averages would turn 4.000-4.101 into the next upside resistance.
A breakout from the 10 week sideways range is needed to determine the next move for the market. An upside breakout above 4.101 resistance would turn the longer term trend back higher ahead of winter. A downside breakout below 3.740 support would keep the primary market trend down.
If the breakout does come to the downside, it should be fairly short-lived. Once the market bottoms, a rally back higher into the early months of 2015 is expected.
Technical Indicators: Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bullish
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