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Natural Gas Deflating | RJO Futures

Posted 04/13/2017 10:22AM CT | Jeff Ratajczak

The overall trend in the May Natural gas contract is down. It is between the heating and cooling seasons, so the usage figures should be down. Underground storage should increase too. Storage may be increasing because of the pipeline as well. Resistance is seen at 3.190-3.210, then above that at 3.290. A close above 3.300 is needed to reverse the trend. The momentum indicators are at mid levels and turning lower. This could support lower action if support is broken.

Support is 3.140-3.110. A close beneath the gap near 3.020 may signal sell offs to a new trading range below the three dollar mark.  

Today, we were expecting a 5 bcf build is natural gas storage. The previous week saw a draw of 2 bcf. The actual number was double that and came in at 10 bcf. More Gas equals lower prices. These numbers are above the 5 year average, but slightly lower than last year’s storage numbers. 

The 7-10 day weather forecast has slightly lower than average temperatures forecast, which may increase usage, but not enough to support new hi’s. 

Exposure to the short side of the market is warranted in my opinion. Short the May contract with a trailing stop, or long puts or put spreads for the more cautious trader.

 

May '17 Natural Gas Daily Chart

Jeff Ratajczak

Jeff attended Illinois State University. In 1993 Jeff began his financial career in the stock market as a retail broker. He transitioned to futures in 1999 with LFG Intermarket Group, which became ZAP Futures. In 2004 ZAP Futures was acquired by RJO Futures' parent company R.J. O'Brien. Jeff's focus is to assist clients in managing risk and speculate through futures and options strategies.