Technically Oversold, Natural Gas Futures Short-Covering Rally May Prove Sustainable Amid Bullish Seasonality

Natural gas futures were poised for a sustained rally after a sell-off took technical indicators into oversold territory ahead of the May contract’s roll off the board at the close of business on Monday, with June taking the lead and looming summer heat favoring market bulls.

Prompt month Nymex natural gas settled up 23.3 cents at $3.170/MMBtu Monday. The gains followed sharp losses last week. The contract settled Friday at $2.973, its lowest settlement since mid-November. June futures closed the week’s opening session 22.9 cents higher at $3.343.

“Last week’s lows represented a full round-trip retest of the December breakout from a downtrend line,” DeCarley Trading analyst Carley Garner told NGI. She explained that prices rallied until the market broke above the trendline at around $3.300 in December. It quickly retested that trendline and then rallied sharply into March. “The recent sell-off has brought the market back to the trendline, which should offer sharp support.”