The October 14 natural gas contract rallied up to a new 6-week high of 4.101 in last Thursday’s session but couldn’t extend the gains on Friday.
The contract instead posted a bearish inside range reversal (harami candlestick) bar on Friday which has been followed by heavy selling in the overnight session.
Last week’s 4.101 high is technically important as it held below former trend line support on the weekly chart which was broken in mid-July. The inability to rally back over this former support was a bearish signal for the market.
The October contract closed Friday’s session at 4.065, up .182 or 4.7% for the week. Much of last week’s gains have been erased in early trade this week as the October contract is currently trading just above 10 and 40 day moving average supports between 3.945-3.960.
A close below the 10 and 40 day moving averages would turn the near term trend back lower possibly leading to a retest of the 3.740-3.760 weekly lows set over the past month.
A rally and close back above last week’s 4.101 high is needed to turn the longer term trend back up.
Hedge funds are adding to existing long positions in the natural gas market. Last Friday’s Commitment of Trader’s report showed funds long 215,342 contracts (futures only), up 14,505 from the previous week.
Technical Indicators: Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bullish
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