Natural Gas May Rebound From Contract Low: Technical Analysis

Natural gas futures for April delivery may rebound from a 12 percent decline this year after it becomes the front-month contract today, according to a technical analysis by Chris Kostas, a senior analyst at Energy Security Analysis Inc.

The relative-strength index, known as the RSI, for the April futures fell to 31.62 yesterday. The index touched 31.41 on Feb. 17, the lowest level since Oct. 25. Readings near 30 suggest prices will increase, while figures above 70 can be sell signals.

“Once March expires, there is a good chance that the April contract could see upside price movement, most likely up to $4.40, maybe even $4.60,” said Kostas, based in Wakefield,Massachusetts. “The RSI indicates the contract has been oversold.”

April gas futures dropped 6.4 cents, or 1.6 percent, to $3.872 per million British thermal units yesterday on the New York Mercantile Exchange, the lowest settlement price for the contract since it began trading in 2005.

The March contract, which expired yesterday, fell 2.7 percent, to $3.793 per million Btu, the lowest settlement price since Oct. 27 for a front-month contract. Gas futures have declined 14 percent this year.

The April contract gained 7.1 percent in the four days after Oct. 25, when the RSI declined to 24.4.

(Source: http://www.bloomberg.com/news/2011-02-25/natural-gas-may-rebound-as-contracts-for-march-expire-technical-analysis.html)