Natural Gas Futures (NG) Technical Analysis – Bulls Throw in Towel as Prices Post Worst One-Day Slide Since January

Natural gas prices plunged on Friday as the latest forecast showed no sign of a lingering cold pressure dome needed to drive up demand for heating fuel.

The outlook for the second week of December turned warmer overnight, with temperatures now expected to be above normal across most of the contiguous U.S., according to forecaster Commodity Weather Group LLC.

“The trends into mid-month should keep getting warmer” without evidence of a stronger high-pressure area that would allow frigid conditions to settle over the Lower 48, CWG said.

On Friday, January natural gas settled at $2.281, down $0.220 or -8.80%.

Prices were down more than 16% in November, and the drop on Friday was the worst one-day slide since January.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed when sellers took out the August 5 bottom at $2.475. The main trend will change to up on a move through $2.743.

Gann angle resistance comes in at $2.423. This angle is moving down $0.08 per day from the $2.743 main top. The next downtrending Gann angle resistance comes in at $2.583.

Short-Term Outlook

Without cold weather to support prices, the market is likely to continue lower over the short-term with the psychological $2.250 level the next major downside target.

As long as the weather continues to cooperate with the bearish traders, look for sellers to step in on any rally.

Bearish players are currently holding massive short positions so the market remains vulnerable to a squeeze, similar to the one we saw in September. However, as long as the weather continues to favor more-than-seasonal temperatures, it’s going to be difficult to find any major buyer who will be willing to step in front of the current downside pressure.

Without a shift in the weather pattern, if there is a rally, it will likely be fueled by profit-taking. Additionally, some of the short hedge funds may be a little uncomfortable selling new lows. They will allow the market to rally just so they can re-short at better prices.