Natural Gas Prices Teeter on the Brink: Will the Rally Sustain?
As the week unfolds, natural gas prices are experiencing a surge in demand driven by harsh weather conditions in the United States. However, this uptrend may be short-lived as supply constraints due to production freeze-offs are also a factor to consider.
Trading within a narrow range since the beginning of the week, natural gas futures are facing uncertainty amidst looming energy policy changes proposed by President-Elect Donald Trump. The potential increase in tariffs on European countries could impact the demand for gas and oil from the US.
While Wednesday saw a rise in natural gas futures due to weather-driven demand, Thursday’s inventory announcement painted a different picture with a lesser withdrawal compared to the previous week. This discrepancy suggests that the current strength in prices may not be sustainable.
Looking ahead, the colder weather expected in the third week of January could lead to volatile movements in natural gas futures. This volatility might culminate in a sudden selling spree in the upcoming week.
Technical analysis reveals a ‘Bearish Doji Star’ formation in the daily chart, indicating a potential reversal in prices. With natural gas futures hovering around $3.384 and facing resistance at $4.011, traders should be cautious of a bearish reversal.
In the shorter time frame, the appearance of a bearish candle in the 4-hour chart signals exhaustion in the current session. Traders looking to capitalize on a downward move can consider short positions above $3.945 with a stop loss at $4.120.
It is important to note that trading decisions should be made with caution, as market dynamics can change rapidly. Stay informed and be prepared for potential shifts in natural gas prices in the coming days.