The rally in the December 14 natural gas contract continues to gain momentum with a breakout Monday above 40 day moving average resistance.
The December contract closed Monday’s session with a .173 or 4.5% gain settling at 4.046. The December contract is up .426 or 11.7% from last Tuesday’s 3.620 contract low on heavy volume. The second and final seasonal low for 2014 has likely been set.
Buying has continued overnight rallying the December contract to a 4.106 overnight high. This high is the first area of resistance today followed by a weekly chart high from the first week of October at 4.184.
Longer term resistance levels are the 4.246 and 4.252 highs set over the past 3 months by the December contract. A breakout above these two highs is needed to turn the longer term trend back up.
The downside gap created on yesterday’s open between 3.955-3.989 is the first area of support today. This gap also coincides with 40 day moving average support at 3.960 today. Longer term support is the 10 day moving average currently at 3.815.
Once this current rally stalls, there should be a downside correction before the market moves back higher. Given the sudden jump in market prices, the downside correction, whenever it comes, could be equally volatile.
Technical Indicators: Moving Average Alignment – Neutral
Long Term Trend Following Index – Bearish
Short Term Trend Following Index - Bullish
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