Where are natural gas prices headed this winter?

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From James Hyerczyk:

Natural gas futures settled higher last week, but not before producing a volatile two-sided trade. The market gapped higher and rallied early in the week then broke into the gap before reversing back to the upside. The price action was all weather driven with traders reacting to forecasts over the next two weeks calling for extreme cold then warm then extreme cold next week-end. There is also another forecast calling for the pattern to repeat the last week of January and the first week of February.

Last week, March natural gas settled at $3.239, up $0.294 or +9.98%.

Despite the forecasts for extreme cold, buyers have been a little tentative having been burned by similar forecasts in December.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. The market is in no position to change the main trend to up, but there is room for a short-covering rally. A trade through $2.771 will signal a resumption of the downtrend.

The short-term range is $2.771 to $3.406. Its retracement zone at $3.089 to $3.014 is support. Buyers came in on Friday on a test of this zone.

The main range is $4.608 to $2.771. If the short-covering rally continues then its retracement zone at $3.690 to $3.906 will become the primary upside target. Since the main trend is down, look for sellers to return on the first test of this zone.

Weekly Technical Forecast

Based on last week’s price action and the close at $3.239, the direction of the March natural gas futures contract this week is likely to be determined by trader reaction to the support cluster at $3.089 to $3.008.

Bullish Scenario

A sustained move over $3.089 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the uptrending Gann angle at $3.251.

Overcoming and sustaining a rally over $3.251 will indicate the buying is getting stronger. This could trigger a rally into last week’s high at $3.406. Taking out this level could trigger an acceleration to the upside with the first target a 50% level at $3.690, the second target a downtrending Gann angle at $3.808 and the last target a Fibonacci level at $3.906.

Bearish Scenario

A sustained move under $3.089 will be the first sign of weakness. This could drive the market into the short-term Fibonacci level at $3.014, followed by a down-trending Gann angle at $3.008. Crossing to the weak side of this angle will put the market in a bearish position with the next target angle coming in at $2.891. This is the last potential support angle before the $2.771 main bottom.

This article was originally posted on FX Empire

The United States Natural Gas Fund L.P. (UNG) was trading at $27.22 per share on Tuesday morning, down $1.19 (-4.19%). Year-to-date, UNG has gained 16.72%, versus a -0.91% rise in the benchmark S&P 500 index during the same period.

UNG currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #52 of 108 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of Yahoo Finance.