Natural Gas Price Prediction – Prices Break Down and are Headed for 2016 Lows

Natural gas prices broke down on Monday dropping near 5% as warmer than normal weather is forecast to cover most of the mid-west and east coast for the next 2-weeks. The trajectory of withdrawals should decline putting inventories at 5-year highs within the next few weeks. Hedge funds continued to add to short positions in futures and options according to the latest commitment of trader’s report.

Technical Analysis

Natural gas prices broke down breaking through weekly trend line support near 1.82 and continuing to trend lower. The next level of target support on natural gas is seen near the 2016 lows at 1.61. The weekly fast stochastic is oversold printing a reading of 1, below the oversold trigger level which could foreshadow a correction. The daily fast stochastic has turned lower generating a crossover sell signal which points to accelerating negative momentum. Medium-term weekly momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Hedge funds continued to add to short position in futures and options according to the latest commitment of trader’s report released for the date ending February 4, 2020. According to the CFTC, managed money increased their short position by 15K contracts while reducing their long position in futures and options by 4K contracts. Open interest that is short futures and options outnumber open interest that is long by 316k contracts, which is near a record.