The U.S. natural gas price continues to correct after setting a three-month high last week. Technical indicators are gradually reducing the accumulated overbought conditions, but there are no signals to resume growth yet. Bulls are probably willing to wait for more favorable gas prices to build up their long positions. Since buyers took a pause, a certain intensification of the gas correction around the 2.54 level could be in sight.
The U.S. and many other countries are still under the summer heat, but its impact on gas quotes has somewhat eased. Prices are being pressured by the gradual recovery of U.S. gas production levels after the completion of field maintenance. Since early July, gas production has risen to 101.9 billion cubic feet per day, exceeding the June average by 1 billion.
At this rate, production could rapidly return to historical highs of 102.5 billion cubic feet per day in May, putting pressure on gas prices. In addition, Gelber & Associates analysts forecast a slight drop in temperatures in the central and southern U.S. states after the extreme heat of previous weeks.
In other countries, the situation with gas demand remains quite sluggish. Only China significantly raised its LNG imports in June to a six-month high of 5.96 million tons. Japan's purchases increased only because of the very low level of imports in May, with volumes down 17.4% compared to last year. South Korea, India, and European countries reduced their LNG purchases due to rebounding prices and high storage capacity levels.
Currently, gas prices have almost reached the 38.2% Fibonacci level (2.63). If no support is found here, they can quickly hit the 50% Fibonacci level (2.54). The RSI indicator continues to move downward after rebounding from the overbought zone, thereby suggesting no price reversal in the coming days.
The following trading strategy may be offered:
Sell gas when the price declines to the 2.63 level. Take profit – 2.54. Stop loss – 2.74.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.