May natural gas futures are in a position to close higher as they continue the base-building process. The slow methodical trade has been chasing some weak shorts while attracting some new speculative buyers. Right now price is doing the heavy-lifting since we really haven’t seen any confirming numbers on the supply or demand side. However, this type of base-building is often a pre-courser to bullish news, but one has to be patient since we’re only one month into Spring and less-than that into the shoulder-season.
Technically, the main trend is down, but the five-day rally has turned $2.561 into a new main bottom. A trade through that level will signal a resumption of the downtrend. The new minor top is $2.746. Taking out this level will change the minor trend to up and shift the momentum to the upside.
Other signs of potential strength will be crossing to the strong side of a pivot at $2.725 and breaking out over the long-term downtrend line at $2.725. Taking out these levels will likely trigger a wave of short-covering that could drive prices into the major resistance, the 50-day moving average at $2.925.
Unfortunately, that could be where the rally stops because that’s the nature of beast. Most traders buy dips in other markets, looking for price appreciation. In natural gas, professionals are looking to short rallies because of the abundance of supply and predictable demand. But be patient, the summer heat is set to arrive in just under two-months. So, if you’re looking for a prolonged rally, be patient. Most good rallies begin with a support base and at least we have that going for us.
