The rally is over: Natural gas loses momentum
|Natural gas prices recently experienced a sharp rally, breaking above the key level of $3.143 and reaching a high of $3.631. However, Friday’s session saw a significant selloff, erasing all gains as prices slipped to $3.279. Bears took the control over bulls after a massive rally. This sudden shift suggests growing bearish momentum in the market.
Natural gas prices are highly influenced by geopolitical events and weather changes. European natural gas markets are currently impacted by the ongoing conflict between Russia and Ukraine. Tensions have led to a 2.5% rise in TTF (Title Transfer Facility) prices recently. This is partly due to Gazprom halting supplies to OMV, sparking concerns over future disruptions. However, Russian gas flows to Europe through Ukraine have remained stable so far.
At the same time, European gas storage levels have fallen below 90%, slightly below the five-year average of 91% for this time of year, which could raise supply concerns as winter demand increases.
Current market outlook
- Bearish Signals: A bearish engulfing candlestick has formed, signaling strong selling pressure. Combined with other indicators, this suggests further downside in the short term.
- Bears in Charge: The trend has shifted southward, and we maintain a bearish view for natural gas prices in the near term.
Technical indicators
- Relative Strength Index (RSI): RSI is below the midline (50), confirming bearish momentum.
- 50 EMA: The 50-period Exponential Moving Average is acting as a resistance zone, adding to selling pressure.
- MACD: The MACD crossover supports the bearish trend, with histogram volumes remaining high.
Key support and resistance levels (4-Hour chart)
- Resistance:
- $3.4060–$3.4070: Immediate resistance. A break above this could push prices toward $3.6150–$3.6310.
- Support:
- $3.1370–$3.1390: Immediate support. A break below this could trigger a move toward $2.9320–$2.9340.
Trading strategy
- Current Price: $3.279
- Recommendation: Sell with a stop-loss at $3.631 and targets at $3.050 and $2.890
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