Is It Time to Short Natural Gas?



Natural gas prices

On March 5, natural gas April futures rose 0.9% and settled at 2.884 per MMBtu (million British thermal units) due to the forecast for severe cold weather this week. On the same day, natural gas prices closed at the highest level since January 29.

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Is it time to short natural gas?

In the trailing week, the forecast for more cold weather than previously expected and inventory data helped natural gas prices rise 3.1%.

Next week, the temperatures might be cooler than expected, which could be a problem for natural gas’s rise. If the temperatures don’t remain cold like this week, natural gas prices might not stay at the current levels next week. This week, the U.S. Energy Information Administration’s inventory data might support natural gas prices, which we’ll discuss in Part 3. The oil rig count at an 11-month low might boost natural gas prices.

Natural gas prices

On March 5, natural gas active futures were 3.7%, 15.4%, and 8.6% below their 50-day, 100-day, and 200-day moving averages, respectively. When natural gas is below these key moving averages, it indicates weakness in the prices. On the upside, the closing level of $2.89 would be important for natural gas prices until March 8.

On March 5, natural gas’s 50-day moving average was 5.1% below the 200-day moving average. In technical terms, if the 50-day moving average falls below the 200-day moving average, the crossover is called a “death cross.” Usually, a death cross is followed by more weakness, which happened with oil.

Natural gas–weighted stocks like Chesapeake Energy (CHK), Antero Resources (AR), and Cabot Oil & Gas (COG) might be in trouble if natural gas prices retreat from the current levels. Broader market indexes, like the S&P 500 Index (SPY), would likely be impacted by any changes in natural gas prices.


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