Natural gas price analysis 20 Jul–20 Aug: bull run may continue

Natural gas price analysis reveals that a symmetrical triangle has formed. How can traders be positioned to benefit from this setup? Read more…

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Natural gas prices have been in a strong bull run in 2021, buoyed by the strong demand from China, Canada, Latin America, Europe, and the United States. Natasha Fielding, a gas analyst at Argus Media, said the storage levels in Europe are the lowest for this time of year in a decade after the long and cold winter, The Wall Street Journal reported.

On the supply front, Bespoke Weather Services said that production in July has ranged between 89 billion cubic feet (Bcf) and 92 Bcf. “On the fundamentals side, our thesis remains that we just do not have the production necessary to alleviate storage concerns,” Bespoke told Natural Gas Intelligence.

For the week ending 9 July, the U.S. Energy Information Administration (EIA) reported an injection of 55 Bcf natural gas into storage, higher than the median 49 Bcf projected by analysts in a Bloomberg survey. This increased the working gas in storage to 2,629 Bcf, which was 543 Bcf less than the stocks a year ago at this time and 189 Bcf below the five-year average of 2,818 Bcf.

With demand outstripping supply, can the bull run continue, and will natural gas prices go up? Read the natural gas price technical analysis to find out.

Natural gas technical analysis: weekly chart

Natural gas weekly chartThe natural gas price has risen from $1.529 in June 2020 to a high of $3.80 on 29 June, a 148% rally in about a year, according to the weekly candlestick chart on Currency.com.    

The price formed an inside week candlestick pattern last week, indicating indecision among the bulls and bears. Both moving averages are sloping up and the relative strength index (RSI) has risen into the overbought territory, indicating advantage to buyers.

If bulls drive the price above the overhead resistance at $3.80, the next leg of the uptrend could begin. The price could rally to the psychological mark at $4, which may act as a resistance. If bulls drive the price above this level, the rally could extend to the next target objective of $4.169.

This bullish assumption will invalidate if the price turns down from the overhead resistance at $3.80 and plummets below $3.497. That could pull the natural gas price down to the 20-week exponential moving average (EMA).

Natural gas technical analysis: daily chart

Natural gas daily chartThe price has been consolidating inside a symmetrical triangle, which usually acts as a continuation pattern. The positive sign is that bulls have not allowed the price to dip below the 20-day EMA during corrections in the past few days.

This indicates that sentiment remains bullish and traders are accumulating on dips. If bulls drive the price above the resistance line of the triangle, the uptrend could resume. The pattern target of this setup is $4.06.

Contrary to this assumption, if the natural gas price turns down from the resistance line, a few more days of consolidation are possible.

The first sign of weakness will be a break and close below the 20-day EMA. That will open the doors for a deeper decline to the 50-day simple moving average.

 

Natural gas buy or sell in the short term

Natural gas price analysis shows the trend favours the bulls. A breakout of $3.80 could signal the resumption of the uptrend that could reach the psychological mark at $4. The first sign of weakness will be a breakdown and close below the 20-day EMA. That could signal the start of a deeper correction.

Further reading

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