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Natural Gas Prices: Below the Key Resistance of $2.90 per MMBtu

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May. 11 2015, Published 1:10 p.m. ET

Trading range

June natural gas futures contracts have been trading in a narrow range for the last four days. Prices broke above the key level of $2.80 per MMBtu (British thermal units in millions) on May 8—led by warmer weather estimates. Prices have been fluctuating between the narrow range—led by increasing natural gas inventories and warm weather estimates.

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Resistance and support

Friday’s rally suggests that prices could continue the momentum and hit the resistance of $2.90 per MMBtu. Prices hit this level several times in March 2015. In contrast, natural gas prices could see the nearest support at $2.50 per MMBtu. Oversupply concerns and normal weather estimates could push natural gas prices lower.

Natural gas prices settled above their 20, 50, and 100-day moving average on May 8. The downtrend channel breakout suggests that prices could hit $3 per MMBtu. The 14-day RSI (relative strength index) is in overbought territory. This indicates that  prices could correct.

Higher natural gas prices are positive for ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG). They’re also positive for energy companies like Sand Ridge (SD), Bill Barrett (BBG), and Laredo Petroleum (LPI). They account for 3.83% of the Spider Oil and Gas ETF (XOP). These companies have a gas production mix that’s greater than 40% of their total production.

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