Natural Gas Consolidation Pattern Hints at Potential Bullish Breakout

Natural Gas Forecast Video for 27.04.23 by Bruce Powers

Natural gas triggers a bull trend continuation today of the developing short-term trend with a move above the prior swing high of 2.38. Unfortunately, the bullish enthusiasm was short lived as it quickly started selling off upon reaching 2.41 and is on track to close with a red candle.

Daily Close Above High Will Confirm Strength

Confirmation of the bull trend continuation signal calls for a daily close above the prior swing high. If that happens, natural gas will be on track to reach the completion of an ABCD pattern at 2.58. That price target is part of a larger potential resistance zone up to 2.62, the 61.8% Fibonacci retracement level. Of course, there are higher targets. But the completion of the developing ABCD pattern looks like a first primary target for natural gas if it can continue higher.

Higher Measured Move Target

Another significant target will be the completion of a large, measured move at 3.00. That’s where the second rally off the lows (2) matches the advance of the first (1). Each is marked with a rising purple arrow line on the chart. It could take some time for natural gas to reach this target. In addition to the ABCD target noted above there are also a couple other resistance zones marked on the chart, each with a Fibonacci level and previous resistance at a weekly high zone.

The developing ABCD pattern is at risk of failure upon a drop below the nearby swing low at 2.17. Further still on a drop below the recent swing low at 2.14. At that point the structure of the ABCD pattern will be violated.

Expanding Triangle Further Evolves

Natural gas continues to trade within a developing expanding triangle consolidation pattern. So far, the signs are pointing to a bullish breakout of that pattern. However, as the pattern continues to evolve proper follow-through is at risk given the nature of price consolidation. We saw that today as a bullish trend continuation signal quickly failed after hitting resistance. Price then fell back deeper into the consolidation pattern.

Watch April Close Relative to Monthly Range

Next, we can watch for where natural gas closes within the monthly range of April. Above the 50% level will lean towards the bulls, while a close below the halfway point, sides with the bears. Or at least points to further consolidation.

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