Will $2.30 be a natural gas bottom?

February 6, 2012 06:00 PM
Market Pulse: Feb 6, 2012

Last week March 2012 natural gas opened Monday January 30 at 2.810 and closed the week at $2.499. On the first trading day of January, March 2012 natural gas opened at $2.986.

Look at the below fundamentals of natural gas taken from the EIA website. We are dealing with record high inventories and the warm winter weather has not helped with demand. Living in Chicago, I know my January heating bill was much lower than last January, and I am not complaining.

On Jan. 23 we saw this market look to be starting a ride up. What caused this? Actually, Chesapeake Energy Corp., a large natural gas producer, announced plans to cut back production. The market came up and tested $2.800 for a number of days then headed back down.

On the daily chart below we see ADX numbers dropping showing a weakening trend. ADX was over 60 before the Chesapeake announcement. Both +DI and –DI are dropping. MACD did cross up over the signal line on Jan. 23 and did add some divergence. That was short lived as now divergence has dropped. Stochastics corrected from deep oversold territory and today are mid-range and pointing up. Check out when Trends in Futures issued a sell signal. Not bad for two months of work.

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