Despite being on a strong uptrend, there appears to be a slight chink in the armor of current rally. Yesterday’s EIA Weekly Storage numbers was a good bullish driver, with inventory increasing by 46Billion cubic feet, way shorter than the expected 55Billion, implying that demand for Natural Gas is higher than expected. Price pushed much higher as expected, breaking above the swing high of 17th Sept and could have been a new bullish extension for current rally. Unfortunately, bulls were unable to hold onto the gains, with prices pushing sharply lower shortly after, hitting the next level of support around 3.68. The degree of the decline is indeed surprising, but if we look at price action since Tuesday, there were already signs of bearishness with each daily consolidation levels slightly lower than the previous one. It is also interesting to note that price of Natural Gas has also failed to rally despite the huge gain in risk appetite due to FOMC’s non-tapering move. Generally Nat Gas does not react to US economic ebbs and flows, but the degree of USD weakness that came forth should have at least nudged prices higher. Hence, it is undeniable that there is some major reason that prices are being depressed. It may not be clear right now, but certainly current uptrend is being threatened and we could see a proper reversal if the bearish narrative becomes clearer.
From a technical perspective, if past trends are repeated, 3.68 should be tested once again today, and there could be a chance of the support level giving way even though we could still possibly squeeze in one more tight consolidation between 3.68 – 3.70. Break of 3.68 will open up next level of support at 3.60 – 3.61. If 3.68 holds, a push towards Channel Top 3.76 may still be possible especially given the unclear reasons why prices are even bearish to begin with.
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