Analyzing Natural Gas: Consolidation and Potential Reversal Patterns

Natural Gas Forecast Video for 25.09.23 by Bruce Powers

Natural gas stalls out to take a rest and consolidates to trade inside day today. However, today’s narrow range is contained in the lower half of yesterday’s price range reflecting continued selling pressure. That selling pressure kicks in again upon new signs of weakness.

Lower Support Levels

Thursday’s decline found support at a low of 2.595, while today’s low is 2.60. Since they are close the lower price level should be watched for continued signs of weakness. A short internal uptrend line (blue dots) reflects support of the past two days, and you can see how today’s low is higher as the trendline ascends as well. The 78.6% Fibonacci retracement is at 2.58, while the 88.6% level is at 2.54. Either represents a price area where support might be seen if natural gas continues to correct lower. The higher level is joined by the rising blue dotted trendline and the lower-level matches with the lower rising trendline.

Natural gas needs to get out of consolidation before it has a chance to get moving again. Volatility has been shrinking as the larger trading range has shrunk in the past month or so. This can be seen from the lower swing highs and lower swing lows more recently.

Inside Day Breakout Above 2.68

On the upside, a decisive breakout above today’s high of 2.68 signals an inside day breakout with natural gas next confronting yesterday’s high of 2.76. If it can get back above there and close above it, there is a chance to then break out above the double swing highs at 2.87. We will be watching to see if yesterday’s test of the 78.6% price zone holds and eventually rejects price to the upside. The 2.87 swing high completed a 78.6% retracement (2.89, close enough) before reversing and the current bearish pullback also arguably completed a 78.6% (2.58) retracement as well. This reflects symmetry between the two retracements.

This Week Completes Bearish Weekly Reversal Candle

As first noted yesterday, natural gas is on track to end the week with a bearish reversal inverted hammer candlestick pattern. Also, the prior week ended relatively weak as well. Therefore, starting next week, a weekly bearish signal triggers on a decline below 2.595.

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