The U.S. natural gas prices have hit their round goal of $3. Most speculators are likely to lock in their profits after a prolonged decline. Apart from that, there could be a short-squeeze, potentially causing a sharp increase in the price of gas.
Analysts suggest there is still time for prices to reverse before the winter ends, as the weather might be a big contributor.
"There's still the rest of January, February and March until the winter season is over, so the weather will continue to play a major part in gas prices," said analysts at Gelber & Associates in a note to clients.
"But with no extended cold snap, storage facilities could be clearly entering bear territory by April 1," the note stated. Analysts spotted that the U.S. gas inventories were down 760 billion cubic feet in the 2.5 months since the winter started, which is 213 billion cubic feet less than the 5-year average.
Data from U.S. bank JPMorgan Chase & Co. show that the chance for an economic downturn has become lower. A recession probability, as calculated on financial markets, has fallen sharply from last year's peak values.
The bank's trading model reveals that seven of the nine asset classes listed there are indicative of recession odds below 50%. This is quite opposite from the results of October 2022. Back then, all markets were threatened by a recession.
Recession risks are going down, meaning demand for energy resources will remain high.
The technical analysis showed that the "bears" took the round level of $3. The target has been reached, and therefore, an upward impulse is possible due to the high volatility of the instrument, through closing short positions. A pattern similar to the head and shoulders is formed on the one-hour timeframe. If the neck level ($3.165) is broken, one can see a significant upward impulse in natural gas prices.
Thus, the first growth target is $3.245, formerly acting as a support for the gas.
Stop-loss is placed slightly below the "shoulder" level of around $3.020.
Natural gas prices are expected to rise:
Take profit - 3.245
Stop-loss - 3.020
This content is for informational purposes only and is not intended to be investing advice.