Natural Gas price continues to tumble, but the bottom may be near

For the past four weeks combined, gas futures have lost about 30%. Prior to that, the market rose almost 20% in the mid-to-late November period on expectations that all of the United States will be in a freezing state during the Christmas week leading into the new year.

Yet The price of Natural Gas has continued its drive back down after peaking in the middle of last year. The price has had an aggressive sell off after an equally aggressive run during the initial stages of the Russian and Ukraine conflict. This was due to Russian gas exports being banned and elevated inflation levels. However, as the conflict has subsided the price of gas has returned to its seasonal trends. In addition, in recent weeks warmer weather has reduced the reliance on the energy source for much of Europe.

The chart from a technical perspective is exceptionally bearish. For the better part of a decade the price was ranging between 1.5 – 6.5. The aggressive move in 2022 as discussed was due to the beginning of the Russia and Ukraine crisis. The price since then looks to have made a head and shoulders pattern which is a bearish reversal pattern. The neckline was at 5.5 and was broken through. The price has also broken down through the 200-day EMA on fairly aggressive volume.

By zooming out, it can be seen that the recent sell off has been the price moving back into its long-term consistent range. Therefore, the price should be nearing a bottom. As the price approaches 1.5/2 it may become a good opportunity for a long trade. An initial target at the top of the range of 6.6 could be a reasonable target for this medium-term swing trade.

The daily chart confirms this move and shows how the price has broken through the mid-level of support at 3.5. The daily chart also shows how the volume has been reducing significantly indicating some potential exhaustion in the short term and a spike in buying may be favorable for an upward thrust in price.

Lastly, the price of Gas could gain momentum if Europe‘s winter brings about cooler weather or if China’s demand increases as it moves out of its Covid 19 restrictions increasing demand. With volatility still high for the price of a natural gas caution should still be had when placing a trade.