Are Natural Gas Prices Overbought? What Follows Thereafter

Natural gas prices are making some unnatural moves. After a nearly 40% rally in the last month — an unusually outsized move for any commodity — the charts are now flashing warning signs, Miller Tabak’s Matt Maley said.

Natural gas prices fell by about 3.5% on Thursday after climbing nearly 4% in the previous session. “Even though I’m bullish longer-term, I just think the thing has become overbought,” the firm’s chief market strategist said. When natural gas prices spiked Wednesday, their relative strength index reached 80, a level that has “signaled near-term tops” throughout much of this year, Maley said.

“On its weekly chart, it also got above 80, and that’s the second-highest, the second-most overbought it has been in a decade,” Maley said. “This doesn’t mean that the bull market is over for this commodity. I just think that when you get a weekly chart that’s overbought, the pullback’s going to last for more than a couple of days, and [Thursday’s] pullback I think won’t be the end of it,” he said. “We’re going to have to see a pullback that lasts for more than just a few days.”

“I think we are due for a pullback, but long term, this is a relatively clean solution to the energy, and I think we’re going to continue to see strength in natural gas over the coming years from a fundamental standpoint,” she said.











SOURCE: CNBC