Natural Gas Market: Long-Legged Doji Pattern
Natural Gas Settles above $3 per MMBtu: Rig Count Increases
Long-legged doji pattern
Natural gas futures for June delivery showed the long-legged doji pattern on May 15, 2015. Prices are fluctuating in an upward range of $2.80–$3 per MMBtu (British thermal units in millions). Estimates of an improved demand outlook and a warmer weather forecast are driving natural gas prices higher.
Support and resistance
Gas prices settled above $3 per MMBtu for the past two trading sessions—this signals bullish momentum. The current momentum could drive natural gas prices to the next resistance point of $3.20 per MMBtu. Gas prices hit this mark in January 2015. Estimates of an increase in demand from power plants and a warmer weather forecast support natural gas prices. In contrast, record inventories and oversupply factors will continue to put pressure on gas prices. The next support for natural gas prices is at $2.50 per MMBtu. Prices tested this level in April 2015.
June gas futures are trading above their 20, 50, and 100-day moving average. The long-legged doji pattern suggests that prices could retreat to the key support level. Likewise, the RSI (relative strength index) is in overbought territory. This means that gas prices could fall.
ETFs like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG) benefit from increasing natural gas prices.
Energy companies like Apache (APA), Nobel Energy (NBL), and Laredo Petroleum (LPI) are also positively impacted by higher natural gas prices. The natural gas production mix accounts for more than 40% of the total production. These companies account for 4.21% of the SPDR Oil & Gas Exploration & Production ETF (XOP).
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