Technical analysis shows gas prices rebound — waiting for news to prove it

U.S. gas prices keep their way down, time after time, hitting new lows since spring 2021. Yesterday it reached the level of 2.6, though the trading session was closed with the growth above 2.7. Considering the magnitude of the whole collapse in recent months, the increase, attained yesterday, could hardly be considered significant. However, now there are two green candlesticks in a row on the daily gas chart. The last time it was seen in early December. The analytics are wondering about any chance of a further bigger bounce.

The situation about a relaunch of the Freeport LNG export facility is slowly but surely moving toward a successful completion. Yesterday, the company requested regulatory approval to start up 1 of the 3 liquefaction units to start LNG production. It is still quite a long time until the plant can reach full capacity (market participants are now focusing on mid to late March), but it is in any case a good sign for gas demand.

Demand may increase much more due to the cold weather, which has finally brought temperatures in the U.S. and Europe closer to the optimal value for this time of year. The current weather conditions in the U.S. are sure to last until the end of this week. The Europe forecast shows that the cold will be there next week as well.

The Stochastic yesterday indicated the strongest oversold gas prices since early December. After that, the blue indicator line began to grow. Today it crossed the red line from bottom to top exactly at the point of exit from the oversold zone. In terms of the technical analysis, the buy signal is already formed. If an additional positive will also come from the news, we may see a strong bounce of the gas up, but for now we will focus on the round level 3.

The following version of trading strategy might be offered:

Buy gas in the range of 2.7-2.75. Take profit – 3. Stop loss – 2.6.

 Traders may also use Trailing stop instead of a fixed Stop loss at their convenience.