Natural gas outperforms the commodity market (Part 2 of 2)

(Continued from Part 1)

The NYMEX (New York Mercantile Exchange) April futures contract for natural gas prices signals a potential ascending triangle pattern. Prices retreated from the key support of $2.65 per MMBtu (British thermal units in millions) on March 10, 2015. The consensus of bullish inventory withdrawals supported the rise in natural gas prices. These factors could steer natural gas prices during this week of trading.

Bearish traders should watch out because the support is at $2.65 per MMBtu for natural gas. The support is formed by prices hitting this mark on February 6, 7, and 9, 2015. Bullish traders could see resistance at $2.80 per MMBtu. Prices hit these levels on February 4 and 13, 2015.

The potential ascending triangle pattern could drive natural gas prices higher. The breakout above $2.90 per MMBtu could push prices to the target of $3.25 per MMBtu. Bullish inventory withdrawals will support the rise in prices. However, oversupply and warm weather would always be the topic of discussion for bears. These factors would drive gas prices lower. Surveys suggest a bearish week for natural gas. According to Barclays estimates, the average price for natural gas is at $2.75 per MMBtu in 2015.

The RSI (relative strength index) is in overbought territory. Prices generally fall at this level of the RSI. Traders should be watchful considering the recent volatility in natural gas prices.

Natural gas volatility affects gas companies’ margins—like Chevron (CVX), Energy XXI (EXXI), and Ultra Petroleum Corp. (UPL). It also affects the margins of gas-based ETFs—like the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG).

Browse this series on Market Realist:

• Part 1 - Natural gas at $2.65 levels seems more likely than $2.75 levels