By Dean Rogers, GM & Senior Analyst, Kase and Company, Inc.
August natural gas stalled at $2.998 late last week and has pulled back to $2.697 so far. The $2.998 swing high was in line with the 1.618 projection of the wave $1.99 – 2.494 – 2.157. From a technical standpoint, the move up was due for a correction. Momentum was exhausted and the bearish KasePO divergence indicates the correction that began Tuesday should now challenge major support levels.
Longer-term, the outlook for natural gas is positive. The move up looks to be forming five-waves. Wave III of the five-wave pattern was completed at $2.998. The corrective Wave IV is now underway. A normal correction should hold $2.61, the 38 percent retracement from $1.99 to $2.998. The $2.61 level was also strong support between June 10 and 17.
A close below $2.61 would open the way for a more significant correction. However, the longer-term bullish outlook would not be called into question unless there is a sustained close below $2.38. This is the 62 percent retracement of the move up from $1.99. Such a move is highly doubtful without a significant bearish shift in underlying fundamentals.
Wednesday’s hammer formation gives us a clue that the move down may halt to a grind lower. A test of Tuesday’s $2.84 midpoint will likely take place on Thursday. Key resistance is $2.88. This is the 62 percent retracement from $2.998 to $2.697. While $2.88 holds, odds will continue to favor a deeper correction.
This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intraweek updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.
About The Author
Dean Rogers is the General Manager and Senior Analyst at the Kase Call Center. Dean began his career with Kase and Company, Inc. in early 2000 as a part-time programmer. Early in his career with Kase, Dean wrote programs and modules to help expedite and automate parts of Kase’s internal forecasting and hedging systems. He also worked extensively with the Kase StatWare® trading indicators. With this work, he quickly became passionate about the markets, and in particular, technical analysis. Dean’s new found market enthusiasm, along with his strong work ethic and dedication to Kase and its clients, resulted in him becoming Ms. Cynthia A. Kase’s protégé and ultimately her “right hand man”.
Dean oversees all of Kase’s day-to-day operations and writes Kase’s award winning weekly and quarterly crude oil and natural gas forecasts. He also teaches at Kase’s technical analysis and energy risk management courses, manages all programming and development, and collaborates closely with Ms. Kase in developing new software and carrying out quantitative analytics research.
Dean is a member of the Market Technicians Association, has been quoted in numerous publications including the Wall Street Journal®, Bloomberg® and Reuters® publications, and Black & Veatch’s® Cap Markets Report. He has also been published in Technical Analysis of Stocks and Commodities® magazine and contributed articles to various eSignal™ and Bloomberg® publications.