After falling to a new contract low of 3.620 in early trade last Tuesday, the December 14 natural gas contract reversed back higher on very heavy volume into Friday’s close.
For the week, the December contract gained .175 or 4.7% settling Friday at 3.873.
The market has gapped sharply higher in early trade today rallying the December contract over the 4.000 level.
Today’s early strength is further evidence that last week’s low was a seasonal bottom for the market. While setbacks are to be expected, the trend for the next several months should be sideways to higher.
The 4.065 overnight high is the first area of resistance today followed weekly chart resistance at 4.184. Longer term “breakout” resistance levels are the 4.246-4.252 highs set in August and September. A rally above these two highs is needed to turn the longer term trend back up.
4.000 is the first area of support today followed by the 40 day moving average and last Friday’s high at 3.955-3.960. Longer term support is the 10 day moving average down at the 3.780 level today.
Friday’s Commitment of Trader’s report showed funds long 149,704 natural gas contracts, down 708 from the previous week. This data was as of last Tuesday’s close and doesn’t include end of week position changes. Funds were likely heavy buyers in last week’s trade.
Bottom line – Market reversal on high volume last weekend is indicative of a final seasonal low being in place for the market.
Technical Indicators: Moving Average Alignment – Neutral
Long Term Trend Following Index – Bearish
Short Term Trend Following Index - Bullish
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