The June 15 natural gas contract gained over 5% in just one minute of trade on Thursday following release of the weekly EIA storage report.
The contract also closed higher for a third consecutive day adding .145 on Thursday to settle at 2.751.
Recent strength follows a new contract low which was set in Monday’s trade. After bottoming out at a 2.481 low, the June contract has been moving steadily higher.
It is still too early to know if a post-winter low has been set or if the market has just gone through another short-covering rally. Short-covering rallies which last from 2-4 days are typically followed by sell off back lower which retraces all the upside gains. The most recent short covering rally in the June contract was in mid-April .
If the market fails to sell off over the next few sessions, it could indicate a post-winter low has been set. The 40 day moving average was broken as resistance yesterday and now becomes the first area of support today at 2.715 with long term support at the 10 day moving average currently at 2.610.
Thursday’s 2.770 high is the first area of resistance followed by 2.850-2.860.
The next few days will be a very important technical test 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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