Natural Gas Technicals – Bearish Rejection before EIA Data

Daily Chart

Is the rally from July’s low over? It may be too early to say, but technicals are lining up nicely for a bearish move. The gains made last week has been mostly eroded, confirming the bearish rejection from the 3.82 support turned resistance. The 3 Black Crows setup since then has seen some sideways movement after finding support via Ichimoku’s Kijuu Sen and confluence with 3.68 ceiling which has been the support back in June. Currently, price is facing further resistance from the descending Kumo, while stochastic readings are currently around the levels where peaks have been seen – on 2nd May and Jun 20 to name 2. This suggest that price may be able to start a fresh bearish cycle from here, as precedence does allow for it. Considering that price has been in a downtrend since April highs, such a scenario becomes even more likely.

With US Energy Information Administration Storage Report coming out today, a higher than expected inventory count will help price accelerate lower faster. As it is, bearish sentiment is already surrounding prices due firstly to the overall risk-off sentiment, and secondly by EIA’s own revision of previous week’s storage volume, which has been upwardly adjusted by 2%. If we take cue from yesterday’s Crude Oil’s reaction to the EOD data, we may perhaps even see Nat Gas prices heading lower should the increase in volume meet or come in just slightly below expectations (meaning slightly higher implied demand). Short-term bearish target would be 3.68 once more, but should price decline due to today’s economic news release, it is likely that the decline will be even stronger, perhaps closer to 3.60 support. 3.50 is a viable bearish target, but it is unlikely that price will be able to hit it on a single daily move unless the data proved to be extremely bearish, perhaps in the degree of 10-20B cubic feet above expectations.

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