Now You’re Cookin’ With (Natural) Gas!

Natural Gas has had a horrible time since 2008 but it looks like those troubles may be coming to an end soon. There seem to be some investor preference changes that are impacting it (link below) but the time series of charts for Natural Gas on its own also points to a higher future. Let’s take a look from the long view back in. The monthly chart for Natural Gas Futures ($NG_F) below shows it falling from a double top mid 2008 eventually losing about 80% of its value in a little over a year. Wow, 80%!

Natural Gas Continuous Contract – Monthly

But since then it regained 33% of that fall before falling back into the current range between 3.80 and 4.80 where it has been for the last 18 months. There are a few things to note from this chart. First, the Moving Average Convergence Divergence (MACD) indicator is slowly rising while the Relative Strength Index (RSI) pegged below the mid line has been trending closer and closer to it. Second, the fall created a long uptrend line base, plus notice the parallel support/resistance line above it. Third, the Bollinger bands on this timeframe are as tight as they have ever been, foreboding a big move. Finally the price is now testing the top of the channel. A positive set up on this basis with a breakout target of 6.00 and then the trend line resistance at 7.00 above that. A

Natural Gas Continuous Contract – Weekly

closer look on the weekly chart reveals that channel from the monthly chart can be viewed as a rounding bottom with the price moving higher the last 5 weeks. The moves since March have established three consecutive higher lows and higher highs. On this timeframe the RSI has moved firmly above the mid line and has bounced off of it as support. It is hard to see but the MACD is also slowly rising and positive. This is also a positive setup with a breakout level at 4.94 and a first

Natural Gas Continuous Contract – Daily

target at 5.50 and then 6.00. Switching to the daily timeframe above shows a few more interesting features. The move from the bounce up in January 2010 to the low in October 2010 was retraced nearly to the 61.8% Fibonacci level before falling back to the support of the 50% level. There is also now a rising trendline resistance that is intersecting that 61.8% Fibonacci at 5.00 and will be rising through it shortly. Also note the resistance higher near 5.20.

If Natural Gas can hold this 50% Fibonacci on the daily time frame and ride the trendline resistance higher then the major breakout that traders have been waiting for might be about to happen. To recap, resistance above the 4.94 -5.00 breakout area comes at 5.20 from the daily chart then 5.50 and 6.00 from the weekly chart followed by 7.00 from the monthly chart.

Energy Forecast: Oily With a Chance of Gas

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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