Bullish diamond pattern
The natural gas April contracts show the emergence of a bullish diamond pattern. In contrast, we could also see a rising wedge pattern in the gas price chart. Colder weather estimates boosted the natural gas prices. Prices settled just below the important resistance level of $2.80 per British thermal units in millions, or MMBtu.
Pivot points for natural gas prices
Apart from the current resistance level, the next important resistance is at $2.90 per MMBtu. This resistance is established from the peaks of January 12, 26, 28, and 29. However, bearish sentiments could drive the price lower to the nearest support of $2.70 per MMBtu. Natural gas prices hit this level multiple times since the beginning of 2015.
Bull and bear fight?
If we look at the natural gas prices in the above chart, a bullish diamond pattern breakout from the current levels could push natural gas to $2.90 per MMBtu levels. Bullish factors—like cold weather—support the rise in gas prices. However, the rising wedge pattern breakdown from current levels could push natural prices to $2.65 per MMBtu level. This would be led by natural gas surplus concerns.
Traders should watch the natural gas storage report. The report is due today. Bearish withdrawals could put downward pressure on gas prices.
An important technical indicator is the RSI (relative strength index). It’s in an overbought zone. Prices tend to fall from these levels of the RSI. As a result, traders should watch carefully given the mixed price direction from these patterns.
The United States Natural Gas Fund (UNG) consists of gas futures contracts traded on NYMEX (New York Mercantile Exchange). The rise in natural gas prices reflects in UNG. On March 4, 2015, UNG settled at $14.05—up by 2.48% for the day. Based on natural gas price movement, UNG might trade between $13.50 and $14.50 levels.
The rise in natural gas prices impacts gas companies’ margins—like EOG Resources (EOG), Southwestern Energy (SWN), and Anadarko Petroleum (APC). They also affect the profitability of natural gas ETFs—like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and UNG.