Natural gas buy signals strengthen with target at 4.200 amid reversal formation

US natural gas prices are showing signs of recovery in the second half of the week, rising above the 3.20 per million British thermal units (MMBtu) level. The price has been falling since early April amid rising output and forecasts of mild weather in key regions of the country.

According to the latest data, gas production in the continental states reached record highs. April averaged 106.3 billion cubic feet per day, surpassing March's previous daily record of 106.2 billion cubic feet. Expected lower demand due to high temperatures persisting through April 29 is contributing to higher inventories.

Growth in liquefied natural gas (LNG) exports remains a deterrent to falling prices. Flows to export terminals rose to 16.3 billion cubic feet per day due to the startup of Venture Global's new Plaquemines plant in Louisiana.

At the same time, the trade standoff is impacting demand. Asian countries are looking to increase their purchases of US LNG in an effort to reduce their trade surplus with the US and ease pressure from the Trump administration's new import duties. This could strengthen demand for US natural gas.

Technical analysis shows that natural gas prices are forming a broadening wedge, or megaphone, pattern on the daily chart (D1), signaling increased volatility and market uncertainty. The price is approaching the lower boundary of the formation, which may portend a rebound from it. The Stochastic Oscillator (default settings) is already in the oversold zone, which strengthens the probability of an upward reversal.

Signal:

Short-term prospects for natural gas suggest buying. 

The target is at the level of 4.200.

Part of the profit should be taken near the level of 3.630.

A stop-loss could be placed at the level of 2.770.

The bullish scenario is short-term, so trade volume should not exceed 2% of your balance.