There Is No Longer an Overbought Condition for Natural Gas Prices, Which has Dropped Sharply

After hitting a 13-year high on Monday, natural gas prices plunged 8.5% on Tuesday. LNG demand remains strong, and natural gas arrivals at LNG terminals continue to climb. Natural gas demand is likely to rise in the coming two weeks due to colder-than-normal weather.

This week's LNG exports from the United States are down from the week before by four ships. Between April 7 and April 13, twenty LNG ships with a combined capacity of 75 Bcf left the United States, according to the EIA. Lower LNG exports this week were caused by bad weather in the Gulf of Mexico, which included high winds and waves of up to 7 feet and scheduled maintenance.

Technical Analysis

On Tuesday, the price of natural gas dropped. Support is expected near the 10-day moving average at 6.72. The 13.68 high from July 2008 serves as a target for resistance.

As the fast stochastic generated a crossover sell signal, the short-term momentum has reversed and become negative. Both the quick stochastic and the relative strength index have shown a decrease in price since reaching overbought levels.

In the medium term, the momentum has shifted in favor of the bulls. MACD histogram prints in the green zone with an upward sloping trajectory, suggesting that natural gas prices are on the rise beneath the surface.