Developing Patterns in Natural Gas: Expanding Triangle and AB=CD Pattern

The technical characteristics for the price of natural gas are slowly improving, yet it remains vulnerable as it further develops a possible bottoming formation. A bull trend continuation signal was confirmed on a daily close above the prior swing high around 2.39 recently. The high of the developing uptrend is now at 2.53. Plus, there have been two daily closes that happened above the 34-Day EMA. Finally, the 8-Day EMA (fast moving, blue) is about to cross up and above the 34-Day EMA, although it has not happened yet. Once it does, another bullish indication will occur.

Expanding Triangle Bottoming Formation

There are two developing patterns that are being watched closely. First, there is an expanding triangle at the bottom of the downtrend. The two trendlines on the border of the pattern are heading away from each other. This consolidation pattern shows price volatility increasing as the pattern moves forward in time. Last week’s advance to new trend highs found resistance near the top line, with price then quickly falling back into the formation.

Rising ABCD Pattern

Then there is an AB=CD pattern rising off the bottom. In this pattern, we’re anticipating a similar move in the CD leg that was seen in the AB leg. There is a match around 2.58, which is the initial target from the pattern. If the integrity of the AB=CD pattern is maintained, natural gas should not drop below the most recent swing low of 2.14. If that occurs a test of the bottom range of the expanding triangle could be in process.

Measured Move Higher Targets

A more significant upside target in natural gas lies around 3.00, close to the 3.03 high from February. That lower price level completes a measured move off the April low of 1.95. We’re looking for the current measured move (2) to match the distance seen in the first one (1). That occurs at the 3.00 target and would reflect symmetry between the two rallies if it happens.

It may take a little while longer before natural gas can get going off the bottom, but the environment for it to occur continues to slowly improve.

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