Since I wrote my last piece, traders have been wary of a bumpy move after witnessing a constant selling spree in the last week.
Natural gas futures have remained quite volatile after opening for the week and picked up a bullish move after hitting a low at $2.393 amid growing hopes for a change in weather.
On Monday, natgasweather.com reported:
"Weather systems will sweep across the US Mon-Wed with chilly highs of the 20s to 50s, lows of 0s to 30s for higher demand, aided by cooling into portions of Texas and the South with lows of 30s-40s. A milder break between cold shots will set up from Texas to the Ohio Valley Thu-Fri with highs of 50-80s to ease national demand to moderate. However, cold weather systems will return over most of the US next weekend."
This outlook looks supportive of keeping the uptrend in natural gas prices intact. However, the bulls remain suspicious as increased production is still of great concern until the Freeport export facility resumes normal operations.
After Monday's bullish move, it is up to the bulls to hold immediate support at $2.585 to cross the next resistance at $2.767 on Tuesday. Any breakout or breakdown out of this price range could define the next directional move.
Technically speaking, in a 1-Hour chart, the prices are still below significant resistance at the 200 DMA, which is at $2.643. Only a breakout with a sustainable move will provide an initial indication of further direction.
The prices are holding above the 9 DMA since the formation of a bullish crossover, with its crossover above 18 DMA on Monday. This indicates that the bulls remain in the driver's seat if both the 9 DMA and 18 DMA cross above the 200 DMA in today's trading session.
The price could continue to experience sudden surges in volatility up to the weekly inventory announcement as the put/call premium ratio still favors the bears. However, the put/call open interest ratio could favor the bulls. Wild price swings could also continue to emerge on every rally or downward move.
However, the price trend could turn bullish if the futures find a sustainable move above the next significant resistance at $3.310.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.