April natural gas prices drifted lower during the overnight trading hours but bounced from a test of yesterday’s new contract low. Perhaps that is a sign that the 19.5% decline from the February 23rd high into yesterday’s low could be overdone and vulnerable for more upside. There was more progress made on the use of natural gas as a transportation fuel yesterday, with a plan between General Electric and Chesapeake energy to supply more US compression stations in late 2012. Meanwhile, expectations for this morning’s EIA storage report are for a draw in the range of 80 to 85 bcf, which compares to last year’s same week draw of 63 bcf. The wildcard in today’s report could be the impact of US nuclear outages that have been running above average for this time a year in recent weeks.

Technical Analysis

NATURAL GAS (APR): The sell-off took the market to a new contract low. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The close below the 9-day moving average is a negative short-term indicator for trend. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is 2.247. Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around 2.336 and 2.370, while 1st support hits today at 2.274 and below there at 2.247.

StockMarketNews Research Team