Natural gas prices may be poised for a short-term rebound

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Natural gas prices have fallen by nearly 30% since early March and now appear to have reached oversold conditions, suggesting a potential bounce of more than 10% back to $3.75 per million British thermal units. Natural gas has risen above its 10-day exponential moving average (EMA), indicating a possible short-term trend change. The 10-day EMA, which previously acted as resistance, could provide support as the commodity’s price increases. A failure to maintain it may signal that the attempted trend reversal has been unsuccessful.

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Natural gas reached oversold conditions around 20 April, when its relative strength index (RSI) fell to 30 and prices touched the lower Bollinger Band. Momentum now appears to be shifting, with the RSI showing signs of turning upwards and potentially breaking its downtrend. If this positive momentum continues building, natural gas prices could rise towards their 20-day simple moving average (SMA) at $3.56. Should prices extend beyond the 20-day SMA, they could rise to $3.75, where prices consolidated for several days around early April.

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A failure to reach the 20-day SMA, or an inability to push beyond that level, could suggest natural gas prices may fall back to retest recent lows around $3.05 to $3.10, with the potential to decline further towards the lower Bollinger Band at $2.85.

For now, natural gas prices indicate a possible short-term turnaround. However, prices will need to continue extending higher to confirm that a bottom has indeed been reached.

Written by Michael J Kramer, founder of Mott Capital Management

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