Examining Natural Gas Trends: Is a Major Rally on the Horizon?

Natural Gas Forecast Video for 11.07.23 by Bruce Powers

It looks like last week’s low of 2.54 in natural gas may have completed the retracement. That low was just shy of the 34-Day EMA at 2.52. Today, natural gas broke out above Friday’s high of 2.68 but does not look like it will be able to close above that high. A daily close above that high is needed to confirm the breakout and increase the likelihood of natural gas moving higher in the near-term.

Watching for Daily Close Above 2.68

Following a daily close above last week’s high to confirm strength, the small downtrend line would then need to be busted. Following that there is last week’s high of 2.79. A new rising ABCD pattern has been added to the chart assuming last week’s low is a retracement low. When we do that, we get a target of 3.28. That target is right around the area where the downtrend intersects several Fibonacci levels and the rising trendline at the top of the parallel channel. Nevertheless, if it is to be reached it may take some time.

Further Signs of Retracement Completion

If last week’s low does confirm the completion of the retracement, it creates a higher swing low. Of significance is relationship to the previous swing low. Notice the relationships between the two previous swing low with their priors. Each new retracement didn’t find a bottom until it was much closer to the previous low.

The current retracement stopped just below the 38.2% retracement, showing relative strength compared to the prior two retracements. The most recent retracement was approximately 61.8%, while the one before that stopped around the 78.6% level. This shows underlying strength in natural gas if it rallies before pulling back to a new retracement low.

Why is This Important?

Let’s step back a moment and consider what happened off the first low in natural gas at 1.97 in February. Certainly, the sharp rally that followed was a reaction to the waterfall decline. But could similar aggressive buying in a short period of time happen again. Might natural gas be preparing itself now for such a launch? The point here is not to predict that it will happen as the future is always uncertain, but rather to be ready if there are bullish signs pointing in that direction.

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