It was a volatile period of trade in the natural gas market last week. The week began with a strong rally higher after the October 14 contract held above 3.740-3.760 weekly low support for a third time over the past 8 weeks.
The a rally higher by October contract topped out at a 4.016 high on Tuesday before turning back lower. A sell off into the end of the week dropped the October contract to a 3.786 low on Friday but it moved higher into the close. For the week, the October contract gained .038 settling Friday at 3.857.
The October contract is now entering into a 9th week of sideways trade. Four price breaks including two last week all found buying support in the mid-upper 3.700 area. And three price rallies including last week over the past 8 weeks have all stalled out at 4.000-4.100 resistance.
A breakout from this range will dictate the next move for the market. A downside breakout below 3.740-3.760 support would keep the primary trend down with the 3.589 contract low then becoming the next downside objective.
An upside breakout above 4.000-4.100 resistance would turn the longer term trend back higher likely forming the second and final seasonal low for the year.
The October contract has broken out above 10 and 40 day moving average resistance at 3.880-3.890. The next upside resistance now becomes 3.980 followed by last week’s 4.016 high.
Friday’s Commitment of Trader’s report showed funds continuing to liquidate long positions in the natural gas market. Funds as of last Tuesday’s close were long 184,145 contracts, down 12,219 from the previous week.
Technical Indicators: Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bullish
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