• 2 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 5 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 7 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 8 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 3 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 3 days New Video Game Targets Oil Infrastructure
  • 3 days Shell Restarts Bonny Light Exports
  • 3 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 4 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 4 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 4 days Rosneft Signs $400M Deal With Kurdistan
  • 4 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 5 days Conflicting News Spurs Doubt On Aramco IPO
  • 5 days Exxon Starts Production At New Refinery In Texas
  • 5 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 6 days China To Take 5% Of Rosneft’s Output In New Deal
  • 6 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 6 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 6 days VW Fails To Secure Critical Commodity For EVs
  • 6 days Enbridge Pipeline Expansion Finally Approved
  • 6 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 6 days OPEC Oil Deal Compliance Falls To 86%
  • 7 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 7 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
Alt Text

The U.S. LNG Boom Could Be About To Stall

United States LNG has seen…

Alt Text

China Drives Natural Gas Demand Boom

China is poised to surpass…

Alt Text

2 Red Flags For The World’s Top Shale Play

Changing legislation and taxation for…

Natural Gas Analysis for the Week of October 17, 2011

Natural Gas Analysis for the Week of October 17, 2011

Technical traders could not have asked for more from December Natural Gas futures last week. Not only did the contract post a daily closing price reversal bottom on October 13, but it followed up with a weekly closing price reversal on Friday, setting the stage for a possible start of a huge recovery rally.

Although the main trend is down, the weekly closing price reversal bottom signal is often the start the bottoming process. A follow-through rally through last week’s high at 3.984 could be enough to trigger an acceleration to the upside. It’s not clear whether buyers are participating in this bottoming action, however, with the market overloaded with short-traders, it doesn’t appear it is going to take much to drive many of these traders out of their positions.

Another sign of developing bullish sentiment is the close over a pair of steep downtrending Gann angles at 3.763 and 3.831 this week. These angles from the 5.283 and 4.871 tops have held the market down for 19 and 13 weeks respectively. The close over these angles sets up the potential for another round of short-covering this week.

Natural gas price movements

A typical weekly closing price reversal bottom triggers a 2 to 3 week rally that often reaches at least 50% of the previous break. Based on the 4.871 to 3.747 range, bullish traders can anticipate a potential retracement to 4.309 to 4.442 over the near-term.

The fundamentals may have to take a backseat to the technicals this week since there isn’t much bullish news to support a lengthy rally. Inventories continued to grow more than expected last week, so the conclusion is seasonal pressure or simply extremely oversold conditions triggered the rapid turnaround in the Natty Gas market last week.
While we are speculating about the reason for the bottoming action, we should throw in the possibility of an early winter. It’s funny how talk of an early winter seems to always come up when prices are cheap. Nonetheless, the rumors swirling about cool weather hitting strategic areas may have been enough for some short-traders to pare their excessively short positions.

With prices low and inventory high, it is going to take extremely cold conditions for long periods of time to burn through enough natural gas to trigger a panic. Based on this conclusion, bullish traders should just accept a quick rally into the retracement zone and walk away from the long side until the technical and fundamental conditions come to an agreement.

Factors Affecting Natural Gas This Week:

Short Covering: Short traders have driven natural gas down for over three months. Low prices and oversold conditions coupled with rumors of an early winter may have just been the right combination of events to scare some of the weaker short out of their positions. If supply and demand is their main guidance, then don’t be surprised if these traders refresh if prices are higher after a 2 or 3 weeks.

Supply and Demand: Natural Gas inventories are still bearish despite last week’s rally. Exploring rigs are still at a high level without any signs of letting up. Until this number drops below 800, it should continue to be a bearish factor. Last week’s rig count stood at 936. Simply stated, injections into supply have to stop and/or demand has to increase to sustain a long-term rally. Until this, rallies are likely to be sold.

Weather: The forecast for below normal temperatures over the next 6 to 10 days may be enough to encourage more short-covering, but what this market needs is an early long, lingering cold snap in the Midwest or on the East Coast to put a little fear in the bearish traders.

By. FX Empire

FXEmpire.com is the Forex flagship site of the FX Empire Network. The FX Empire Network provides readers with the most expert and most timely technical analyses, fundamental analyses and news-pieces; this in order to empower them to make for themselves the best possible financial decisions. The FX Empire Network’s other flagship sites include: StocksEmpire.com and CommoditiesEmpire.com.

 

 


 




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News