A three week rally higher by the February 16 natural gas
contract which began in mid-December at the 1.802 contract low added .693 or
38% before topping at a 2.495 high. This was followed by a sharp selloff
in last week’s trade during which the February contract lost .372 or 15%
settling Friday at 2.100.
54% of the 3 week gains made by the February contract was
erased in last week’s trade leaving the market technically weak.
The February contract is currently higher on the session
after bottoming out at a 2.044 low on overnight weakness. The overnight
low is the first area of support today followed by 1.980-2.000. Longer
term support is at 1.900-1.910 followed by the 1.802 contract low.
The 40 day moving average at 2.195 is the first area of
resistance followed by the 10 day moving average currently at 2.275. A
close above both averages is needed to turn the near term trend back up.
Bottom Line – Market near term oversold but the trend now
appears to have turned back down.
The funds poured money back into the natural gas market on
the long side according to the Commitment of Trader’s report released on
Friday. The funds were net long 61,970 natural gas futures as of last
Tuesday’s close, up 22,689 contracts or 58% from the previous week.
Technical Indicators: Moving Average Alignment –
Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bearish
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