Natural Gas: Tilting Temperatures Could Turn the Trend Around
Satendra Singh | Jan 09, 2023 20:47
During the last four weeks, a steep slide in the natural gas futures was an 86-degree fall that thrashed the bulls despite the onset of winter on Dec. 21, 2022.
Changing weather announcements indicated warmer weather for the New Year weekends, which pushed the natural gas futures to hit a new low during the first week of 2023.
Most of the traders were unsure whether to take a long position, as the depth of the slide sparked uncertainty among the bears and bulls.
On Friday, the prices found some relief after reversing from the day’s low and closing in green, ensuring an end to the downside, particularly at this time of the year. On Saturday, an NWS weather alert warned about the cumulative effect of successive heavy rain storms. On Sunday, another alert claimed that:
"Torrential downpours and damaging winds left hundreds of thousands of homes and businesses without power in California."
This will affect the weather outlook for the upcoming week.
Reuters reports that:
"The changing weather outlook warned of another 'atmospheric river' of dense, moist tropical air that will clobber California on Monday with rain and mountain snow."
This abrupt change in weather outlook could result in the gap-up opening on the first trading session of the upcoming week.
Technically, in the weekly chart, a double bottom formation could induce a wild price swing amid a sudden tilt in weather outlook after the prices started a reversal after finding strong buying support at the 200 DMA.
The futures fell during the last four weeks at an 86-degree angle in a weekly chart, ensuring a reversal could be equally steeper at more than an 81-degree angle.
In the daily chart, if the natural gas futures start the week with a gap-up opening in the first trading session well above $3.991, it will be the first confirmation of the next uptrend. A ‘bullish candle’ should confirm the coming surge.
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A long bearish trend in natural gas prices ends here. Undoubtedly, the prices could continue to find buying support on every downward move during the upcoming week.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world.
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