Energy commodities, like natural gas and crude oil, have been in focus as Hurricane Ida tore through the Gulf of Mexico and made landfall in Louisiana over the weekend.
That hasn’t caused a lasting energy disruptions necessarily, but it has sent some volatility through the space.
For instance, last week we saw both crude oil and natural gas spike into the weekend. The Energy Select SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report entered the weekend at its weekly high as well.
While oil has held onto its gains, natural gas is unwinding its recent gains on Monday, down about 3.3%.
Although it’s possible we see more volatility going forward, it’s worth noting today’s moves and trying to put a game plan together going forward. Let’s look at the technicals for both commodities.
A few weeks ago, I warned that oil could fall more than 10% and dip to $60 a barrel. It actually bottomed just below $62 and rallied from there.
At the time, oil prices were near $69, so the caution was warranted. That’s a far-cry from where it was trading in April 2020, when we saw extreme volatility (and negative pricing).
Now rebounding, what can investors look for next?
After an “ABC” correction down toward the 200-day moving average, crude oil has reclaimed both the 10-day and 21-day moving averages, but remains below the $69.60 level. That was the high point ahead of the commodity’s seven-day skid earlier this month.
I’m watching this level, along with the 50-day moving average. Above both measures and a push back into the $75 to $76 range is certainly possible.
On the downside, I want to see crude hold the 10-day and 21-day moving averages, as well as the 10-week and 21-week moving averages, which come into play around $68.50.
Below all of these marks and $65 is possible, followed by a retest of the August lows and the 200-day moving average.
Trading Natural Gas
As for natural gas, we have a bit more volatility as it rallied almost 14% last week. Those gains were led by Thursday and Friday’s action, with prices up 7.4% and 4.9%, respectively.
Interestingly, natural gas gapped up on Monday and barely eclipsed the 161.8% extension. The commodity faded quickly and is now on the cusp of giving us a bearish engulfing daily candle.
From here, it’s pretty simple: Keep an eye on the $4.20 area. That was resistance in July and earlier this month, as well as last week.
If natural gas holds that mark, $4.50-plus remains on the table. If it fails to hold it, the 10-day and 21-day moving averages are in play, along with $4.00. Below the latter and another test of the 50-day moving average could be in the cards.