Analyzing Natural Gas: Consolidation, Resistance, and Upside Potential

Natural Gas Forecast Video for 13.10.23 by Bruce Powers

Natural gas continues to consolidate as Wednesday’s trading range is contained within yesterday’s range. Although the rally has stalled since hitting Monday’s high of 3.47, trading has been occurring near the highs of the trend as a relatively tight consolidation pattern takes form. This is a sign of strength, at least so far. Having a relatively tight consolidation form above support of the 200-Day EMA, after natural gas traded below it until last Wednesday, shows persistent demand and is supportive of an eventual breakout and continuation of the rising trend.

Watching for Breakout Above 3.47

An upside continuation is first indicated on a rally above the 3.47 trend high. Such a move would also trigger an initial breakout from the rising parallel trend channel. Further confirmation of strength will be needed following initial breakouts. Following a breakout, the first target is the 200% extension of the last decline, which began from the August 9 swing high of 3.02. There will be a relationship there between the last downswing and subsequent upswing, and therefore a potential pivot area.

Higher Target Zone Anchored by 23.6% Retracement

Next up would be a Fibonacci price zone from around 3.77 to 3.85. Included within that zone is the minimum Fibonacci retracement of 23.6%, derived from measuring the full downtrend starting from the August 2022 peak of 10.03. It completes at the 3.85 level. That would seem to raise the prospect for natural gas to continue to advance the uptrend as the minimum retracement has a very good chance of eventually being reached.

Weakness Shown on Drop Below 3.17

Nevertheless, a drop below the five-day low of 3.17 may lead to a deeper retracement. That would also put natural gas back below 200-Day EMA. A test of support at the 3.02 swing high may then be in the works.

Finally, keep an eye on how natural gas ends the week. The current weekly candlestick pattern is a narrow range doji. It occurs at the top of a rally and may lead to a top if the low for the week is triggered. This may mean that an upside breakout this week is more bullish than after this week.

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