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Moving Averages Signal Natural Gas Decline: Technical Analysis

Feb. 12 (Bloomberg) -- Natural gas futures may decline as a technical indicator based on moving averages turns bearish, according to Energy Security Analysis Inc.

The moving average convergence-divergence indicator, or MACD, has been negative since Jan. 29, signaling that gas prices may drop, said Chris Kostas, senior power and gas analyst for Energy Security Analysis Inc. in Andover, Massachusetts.

The MACD is the 12-day exponential moving average minus the 26-day exponential moving average. The average gives more weight to the latest data, compared with a simple moving average.

“I’m definitely slightly bearish,” Kostas said. “The bull market doesn’t exist for anyone who’s trading the March contract.”

Gas for March delivery rose 0.7 cent to settle at $3.279 per million British thermal units yesterday on the New York Mercantile Exchange. The futures climbed to $3.418 per million Btu on Feb. 6, the highest in more than a week. The front-month contract is up 32 percent from a year ago.

Gas futures may fall to $3.10 per million Btu, a key support level, in the next week, Kostas said. Prices last slid below $3.10 on Jan. 9.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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