JC over at All Star Charts has done a great job at documenting the larger moves in natural gas and mentioned it yesterday as a guest on Bloomberg radio. Recently nat gas has been on a tear, up almost 50% from its mid-April low. But where it stands as of yesterday’s close, it appears it could be overextended.
The commodity is now approaching its 200-MA as well as a falling trend line of resistance from its June ’11 peak. I’m also seeing a negative divergence in the RSI as well as the money flow indicator (which is a volume-weighted relative strength indicator). Also, according to The Stock Traders Almanac, based on seasonality, natural gas tends to top out in June. With all of these headwinds, it’s possible we see some (at least) temporary weakness in nat gas prices. But just like on the downside, it very well could become even more overbought, so it’s important to not try to jump in front of this moving train until it fits into your personal trading risk/reward paradigm.
