$UGAZ: Natural Gas NG is Waiting for June Heat

Natural gas futures contracts NG finished the day lower after EIA inventory report showed a less than expected build of 81 bcf vs 98 bcf predicted. Regardless of a substantially lower build, NG prices dropped 3.3% on Thursday. Short-term momentum turned negative, while medium term momentum is neutral pointing toward consolidation and possibly lower prices. The chart is slightly below 50% retracement of its recent move up, between $1.60 and $1.89. It is the middle of the range. A move in either direction is possible from here. Near-term resistance is seen at $1.75, level of prior support. Major support levels remain $1.70 and $1.60.

UGAZ is trading within a range, between $15 and $16, as long as NG holds support at $1.70. Lower prices are possible; more consolidation seems likely before we go higher.
The weather is expected to stay within a comfortable range between 60 and 80 degrees, with some heat up to 90 degrees in the Southwest. However, May is considered a shoulder month, when little additional demand is generated at these temperatures. The economy is reopening slowly, with demand growth expected to improve in June, when we switch to trading July contract.

Comment:

On 4Hr and 30 Min Stochastic Momentum charts are pointing lower, but near the bottom, at $1.697. With Memorial Day on May 25th, there may be a sell-off into Friday closing. First week of June should bring in some upward momentum.

UGAZ: For as long as prices remain within the same consolidation pattern, even possibly going lower into $13-$14 range, Fib retracement levels for the upward moves remain: $20. 62 (0.236), $24.08 (0.382), and $26.88 (0.5).

Comment:

NG: There is an unfilled gap, between $1.632 and $1.70, which may be getting filled in the near-term.

Comment:

Correction to original post: A build of 85 bcf (not 98 bcf) was expected.