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Technical signs point to bullish moves ahead for natural gas

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Technical signs point to bullish moves ahead for natural gas

The steep decline in natural gas prices in February was reversed in March and the natural gas market is looking increasingly bullish, according to technical analysts.

Natural gas hit bottom on Feb. 22, when March futures reached a $2.522/MMBtu low and settled at $2.564/MMBtu.

The contract ended the March 28 trading session in its current technical trading range and in the upper half of the trading range, Energy Management Institute principal Dominick Chirichella said.

"The contract made another pass at breaking out of the range to the upside on an intraday basis but failed and settled back inside the trading area," he said.

Markets found support at the $3/MMBtu level to be psychologically supportive enough to turn the market around and form a hammer on March 28, FX Empire analyst Christopher Lewis said.

"We also have the 50-day exponential moving average just above that level, so I think that the natural gas markets may bounce slightly from here," Lewis said, noting that short-term traders "may be able to pick up a move to the $3.12 handle."

By March 29, April futures had surpassed $3.12/MMBtu, reaching a fresh six-week high in short covering at $3.183/MMBtu, trailing May futures that posted a high at $3.253/MMBtu. The April contract expired at the close of business March 29 at $3.175/MMBtu.

Momentum remains positive for natural gas.

Prices rebounded after hitting support near the 10-day moving average at $3.025/MMBtu. A break of this level would lead to a test of the March 17 lows at $2.88/MMBtu, FX Empire's David Becker said.

However, the market traded above the last area of resistance near the March highs at $3.13/MMBtu on March 29, with the break driving a test of resistance near $3.25/MMBtu.

"Momentum is positive as the relative strength index broke out to fresh higher, reflecting accelerating positive momentum, while printing a reading of 56, which is in the middle of the neutral range," Becker said.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities pages.