Natural gas prices break out of their key resistance level
Natural gas prices barely hold on as weather reports spook traders (Part 2 of 2)
Falling wedge pattern
April gas futures contracts broke out of their falling wedge pattern on March 3, 2015. The colder weather forecast was a catalyst, pushing natural gas prices for a breakout above their key resistance of $2.700 per MMBtu (million British thermal units).
Key resistance and support for natural gas prices
The next key resistance level, according to bullish traders, is $2.900 per MMBtu. The resistance is formed from the highs of January 12, 26, 28, and 29. On the downside, bearish traders could see the key support level at $2.70 per MMBtu. Prices hit this level several times in January and February 2015.
Based on the natural gas price chart, the falling wedge pattern breakout could push natural gas prices to $2.900 per MMBtu. The estimates of colder weather conditions should support the rise in natural gas prices. On the other hand, the RSI (relative strength index) is in overbought territory. Prices generally correct at these levels of the RSI. Rallies led by seasonal factors are generally short-term in nature. So traders should be cautious, considering the long-term downward trend for natural gas.
ETFs like the United States Natural Gas Fund (UNG) mirror the performance of natural gas prices. UNG consists of gas futures traded on the NYMEX (New York Mercantile Exchange). Like natural gas, the UNG ETF also rallied. It closed at $13.71—up by 1.09%—on March 3, 2015. As per the pattern in natural gas, analysts expect that the UNG ETF could trade between $13.50 and $14.50.
Natural gas volatility affects other natural gas ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund (UNG). It also affects gas producers like Anadarko Petroleum (APC), Southwestern Energy Company (SWN), and Chevron (CVX).
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