CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Natural Gas Bullish Bias Remains in Short Term

Article By: ,  Financial Analyst
May 8, 2020 1:38 AM

Natural Gas: Bullish Bias Remains in Short Term

The situation of natural gas is similar to crude oil. Investors worried about the decline of demand due to the out-break of COVID-19. The NYMEX Natural Gas futures prices fell around 45% from the high of November at $2.862/mmbtu to the low of April at $1.552/mmbtu.

After that, the NYMEX Natural Gas futures prices rebounded around 38% to the high of May 5 at $2.134/mmbtu on the hope of the economy reopening. Currently, the futures prices eased after the U.S. Energy Information Administration (EIA) reported that natural gas recorded 109 Bcf storage injection for the week ending May 1. The total working gas storage was 2,319 Bcf as of May 1, 796 Bcf above year-ago levels.

Recently, Goldman Sachs released a report about natural gas. The bank raised the forecast prices for the rest of summer to $2.05/mmbtu from $1.85/mmbtu. In addition, the bank lowered the U.S. natural gas production estimation for summer 2020 by 0.9 bcf per day and winter 2020-21 by 0.5 bcf per day. Finally, the bank projected that 2021 natural gas prices would average $3.25/mmbtu to incentivize lower demand and higher supply to bring natural gas storage to manageable levels.

From a technical point of view, although the natural gas futures posted a pullback and returned to the consolidation zone on a daily chart, it is still supported by both rising 20-day and 50-day moving averages. Besides, the golden cross between 20-day and 50-day moving averages has been identified, indicating a bullish signal. If the prices returned the level above the consolidation zone, it would enhance the positive outlook.

The RSI also posted a "Bullish Divergence" signal, when the futures prices formed a support base above $1.52/mmbtu. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again. Currently, the RSI is supported by a rising trend line, suggesting the momentum of prices is still pointing north.

In this case, bullish readers could consider to set the nearest support level at $1.70/mmbtu. Trading above this level, the futures prices could consider an advance to the resistance level at $2.16/mmbtu and $2.38/mmbtu respectively.


Sources: GAIN Capital, TradingView

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024