Energy Market Outlook – May 25, 2018


Author: Jason Scarbrough

It’s summer. It’s hot down here in TX. And it’s hot up there – wherever. 

That’s a good reason for a fundamental move to the upside on a seasonal basis, but before heading into the long weekend we thought we would share some charts that are interesting and seem to be building a nice basis for a larger move to the upside.

This is a shorter term look at the bullish move natural gas has made since Feb 2018.  Note that there is a breakout of an intermediate term upward channel and a shorter term bullish trend that happened four trading sessions ago. There has been follow through every day since (albeit pretty paltry) ending the week at a four month high.  This pop in natural gas usually comes in late April and early May – coming back down to reality into June – however, this year it would seem all of the new production has had the bulls frozen in the headlights. It will be interesting to see what happens when July becomes the prompt (all of summer is trading below $3 right now).

There is a great deal of technical pressure on prices and a very large lack of conviction in the bulls to maintain any kind of sustained rally. This trend will continue until we have some real data on what the increased export, industrial and generation demand can do to the storage levels long term (after our production increase).

However, in the meantime, I would look for a breakout above $3 and resistance to hit the momentum around 3.10 then 3.22.  If that happens we will keep our eyes on September and October for an indication of the breadth of the rally into 2019.

Below is a weekly chart over the past two years that shows the 100 day moving average crossing the 200 day moving average (bullish reversal) and natural gas then breaking out over the 200 day resistance. This isn’t super bullish yet, but indicates bullish and is a solid base for a move higher.