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Could Natural Gas Price Action Be Hinting At Bullish Inventory Surprise?


As we previously discussed (July 13 post), the action during the past 2-3 weeks in nearby natural gas futures represented consolidation in and around the vicinity of the neckline resistance zone (2.75-3.00) of the multi-month base pattern shown below.

The ability of the price structure to preserve the neckline area, and then to thrust to the upside from it, will confirm or invalidate the efficacy of the intermediate-term"bullish" pattern altogether.

Today's powerful up move has the right look of the initiation of a thrust from the neckline into a new upleg that has potential upside targets at 3.30 and then at 3.60. With natural gas inventory data due out again tomorrow morning, and given the current constructive chart and technical set-up, my suspicion is that natural gas price action is hinting at a bullish surprise from tomorrow’s datapoint.

If such a situation emerges, we should not be surprised to see nearby natural gas prices -- and their associated U.S. Natural Gas Fund ETF (UNG) -- rocket 10% in reaction to the news. Only a price implosion that breaks, sustains beneath 2.70, will compromise the timing of the anticipated next upleg.

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