A two week rally by the December 14 natural gas contract that began in late-October was followed by a heavy sell off in last week’s trade.
After topping out at a 4.544 high last Monday, the December contract fell to a 3.931 low during Friday’s trade. It bounced higher from Friday’s low to close the day at 4.020. For the week, the contract was down .392 or 8.9%
Last Friday’s settle held above a confluence of technical support areas that merged just under the 4.000 level. As support held on Friday, buyers have come back in today gapping the market higher in early trade.
Last week’s sell off appears to be a downside correction within a greater uptrend with the 3.620 late-October low being the final low for 2014.
The 10 day moving average at 4.195 held as resistance with today’s current high being 4.188. A breakout above the 10 day average would turn 4.250-4.300 into the next upside resistance followed by the 200 day moving average at 4.400.
Friday’s 4.074 high and the bottom of the gap created on the overnight breakout is the first area of support today followed by the 40 day moving average at 3.995 and Friday’s 3.931 low.
Trade should remain choppy and volatile with a general upward trend in prices expected into early-2015.
Funds added to existing coverage in the natural gas market according to Friday’s Commitment of Trader’s report. Funds were long 145,585 contracts (futures only) as of last Tuesday’s close, up 4,214 from the previous week.
Technical Indicators: Moving Average Alignment – Neutral
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bullish
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