The near term trend for the natural gas market remains down as the market retests previous price lows posted in October.
For the January 15 contract, the October low was 3.707, nearly .200 below the current market price.
The January contract has been heavily sold after topping out at a 4.529 high last Wednesday. Over the following three sessions, the contract has lost .488 or 11% from last week’s high down to yesterday’s 4.041 closing price.
The January contract did rally back over 4.000 late-Monday after bottoming out at a 3.928 low in early morning trade. Selling has since come back into the market dropping the contract to a new weekly low currently at 3.882.
Weakness has continued today but it is highly unlikely new lows will be set on this current downtrend. Last year’s 3.873 low is the next area of support today followed by 3.800-3.810 and the 3.707 October low.
The gap area created on yesterday’s open between 4.041 and 4.075 is the first area of resistance followed by the 40 day moving average at 4.120.
Once a low forms on this current sell off, a trend turn back into the November trading range should follow. A breakout above the 4.633 and 4.689 November highs is needed to turn the longer term trend back higher.
Monday’s holiday-delayed Commitment of Trader’s report showed funds reentering the natural gas market. Funds are currently long 168,183 contracts, up 20,663 from the previous week. The funds were record long 488,901 contracts last February as the market peaked for the year.
Technical Indicators: Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bearish
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