- Natural Gas is correcting within a short-term uptrend.
- The RSI is giving a sell-signal further increasing the chances of a pullback evolving.
- The trend is expected to continue after the correction has finished.
Natural Gas price is in a short-term uptrend evidenced by the rising sequence of peaks and troughs on the 4-hour chart, and the fact it is trading above all its key Moving Averages.
Given the old adage that “the trend is your friend,” the commodity is likely to continue rallying over the short-term horizon (up to 6 weeks) unless and until the evidence suggests otherwise.
Natural Gas 4-hour Chart
The Relative Strength Index (RSI) momentum indicator has been fluctuating at overbought extremes since May 3 and consistently showing bearish divergence with price. This occurs when price reaches new highs but the RSI fails to follow suit. It is a sign of underlying weakness.
The RSI has just moved out of overbought and re-entered neutral territory during the last bar, giving a sell signal. Taken together with the pullback in price it suggests the possibility of a deeper correction unfolding.
The zone of support between $2.42 and $2.32 MMBtu is likely to underpin any declines, however, and provide a springboard to a resumption of the uptrend eventually.
After the correction Natural Gas will probably continue to new highs in line with the dominant uptrend. A break above the $2.50 MMBtu level would indicate a continuation higher, potentially to an initial target at roughly $2.60 MMBtu.
If Natural Gas price breaks below $2.32 MMBtu it will bring the uptrend into doubt and suggest the possibility that a reversal has occurred and a new downtrend is beginning. In such a scenario, short positions as opposed to long positions would be favored.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.