Breakout Rally: Natural Gas Challenges Bearish Trends

Natural Gas Forecast Video for 10.01.24 by Bruce Powers

Natural gas exploded higher on Tuesday, breaking through multiple potential resistance levels, to eventually complete a 78.6% Fibonacci retracement. The high of the day was 3.39 at the time of this writing and the 78.6% level is at 3.34. Today’s advance shows a clear breakout of yesterday’s bullish hammer candlestick pattern and a breakout above the lower trend channel line. Nevertheless, signs of resistance were seen off that high, which could lead to a deeper pullback.

49.8% Advance in 17 Days

Given the subsequent increase in momentum today’s bullish price action may be a turning point for natural gas as it could signal a failure of the bearish flag breakdown that triggered in late-November 2023. If correct, it sets the stage for an eventual continuation of the trend to higher prices. As of today’s high, the price of natural gas is up by 49.8% from the 2.34 swing low hit only 17 days ago. During the 17 days advance natural gas recaptured its 200-, 50- and 20-day simple moving averages, while the more sensitive 20-Day MA has turned up after pointing down since November 6. An additional sign of strength will be signaled once the 20-Day line crosses back above the 200-Day line. It is close now.

Tracing Out Broadening Formation

It may be the case that natural gas is tracing out a broadening formation (purple lines). Once the bottom of the formation is tested and a bullish reversal progresses the top line of the formation becomes a target (roughly). The main point is that price swings all the way back to the other side of the formation. In the case of natural case, it means the chance for the prior trend high of 3.64 to be exceeded increases, at a minimum.

Signs of Short-Term Resistance

Nevertheless, natural gas has reached an area of potential resistance, and a pullback and consolidation may follow in the near term. If today’s high does lead to a retracement a decline down to test the uptrend line as support is very likely, and certainly, a minimum 38.2% Fibonacci retracement, currently at 2.95 is a real possibility of being reached. Further, the 50-Day MA represents potential support at 2.85.

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