Natural gas in the U.S. keeps on falling and reaches a 21-month low. The commodities' correction is also spurring further gas decline. Although gas prices will surely get some drivers in the distant future, today investors are looking at the current market state.
The price of natural gas does not reflect such crucial growth fundamentals as lower temperatures. This may indicate that the gas price is not yet done with its correction.
Temperatures across the bigger part of Northern and Central Europe are expected to drop around their annual average next week. A lower temperature will come after a period of mild weather that has eased the energy crisis. That weather has reduced demand for heating, what let some countries restock their natural gas supplies.
However, the following data speaks in favor of further reductions in gas prices. Over the next few days, the electricity market will be boosted by near-record levels of wind generation in Northwest Europe.
Meteorologists forecast some frost weather in the US, though it will only affect part of the continent.
Temperatures in New York are expected to be below 32 degrees Fahrenheit (0 degrees Celsius) this week, with 11F on Friday and 24F on Saturday. That means utilities will have to use more gas for heating. Gelber & Associates says only the Northeast and New England will be affected by the temporary cold snap.
In terms of technical analysis, the price of natural gas is moving in a downtrend, so it is now closer to its upper boundary. Thus, it is possible to set a downside target for natural gas at the lower boundary of the trend. There is also the next round level of $2.50, from where a technical rebound may occur. The downside target is set a little higher at about 2.51.
There may be a sharp redemption upwards after the round level get reached. A stop loss can be put at the break of the downtrend upwards at the level of $2.75. There is also a pro-trading level, which was significant for investors and from which the price rebounded several times.
Decrease in the price of natural gas:
Take profit - 2.51
Stop-loss - 2.75