Gas prices in the U.S. stopped renewing 1.5-year lows and are trying to stabilize at current levels within a range of 3.4-3.6. Given the extremely negative dynamics of recent weeks, a stop of the decline might itself become a factor for a local rebound at least.
Weather forecasts for the U.S. and Europe suggest a cooling wave to come in the next few days. It’s unlikely that a climate background will be similar to the winter storm we saw in the first half of December, but it is clearly better for gas prices than temperatures above 10 degrees Celsius, which have been persisting over most part of Europe for almost a month.
The Freeport LNG export plant is finally showing some signs of life. Data provided by Refinitiv showed that gas from the pipeline system began flowing into Freeport over the past weekend. And while U.S. federal regulators haven’t yet received a request to restart the Texas plant, the gas flow may indicate that Freeport is slowly starting to get back to operating.
According to a statement made by Freeport LNG representatives on Tuesday, the plant is still getting prepared for a restart in the second half of January. Considering the fact that second half of January has already started, the deadline is clearly tight, and there would be no surprise if the plant's restart is eventually postponed to February. Nevertheless, an announcement of any specific date for the restart of the Freeport LNG plant could cause a sharp increase in gas prices.
A sideways trend in gas prices in recent days has gradually caused the RSI indicator to turn up and leave the oversold zone. Taking into account that there has been no significant rise in price, it’s not a very reliable sign of growth. Still, it indicates a stop of the sharp decline. It will be possible to consider a reversal towards growth in case there’s an upside breakout through the level of 3.9.
The following trading strategy version may be offered:
Buy gas within a range of 3.5-3.6. Take profit – 3.9. Stop loss – 3.4.
Traders may also use Trailing stop instead of a fixed Stop loss at their convenience.