Natural Gas Outlook: Uptrend Strength and Monthly Momentum

Natural gas continued its advance today, exceeding yesterday’s high to trigger a bullish trend continuation signal before reaching a high of 3.03. That high just barely exceeded the 3.02 swing high from early-August but it did. A daily close above 3.02 will provide a new confirmation of strength.

Rallying off Strong Support Zone

Support for the recent retracement was found at 2.86, which successfully tested the 50-Day EMA (orange) as support. This is the market recognizing the 50-Day line following a rally above it and above the 200-Day EMA (blue). Therefore, it can be watched going forward as dynamic support. The current rally is likely heading up to test resistance of the 200-Day EMA, currently at 3.17. The first approach may encounter resistance as the 50% retracement of the decline is at 3.17.

Improving Trend Strength

Nevertheless, given how the trend is starting to show greater strength as it evolves, natural gas has a good chance of getting back above the 200-Day line as the slope of the uptrend increases. This is reflected by the successful test of the 50-Day EMA. In addition, if natural gas holds the new angle of ascent will be defined by the new uptrend line starting from the September 26 swing low. The new trendline is at a 32-degree angle while the lower uptrend line at the bottom of the channel is at a very low 14-degree angle.

Monthly Chart a Concern

Of concern is the developing monthly chart. The month ends next Tuesday, which leaves four more trading days before the end of the month. Currently, natural gas is trading below the halfway point for the month’s range of 3.15. It will be a stronger close if the month ends above that price level as it shows strength on a monthly basis and would be supporting evidence towards a continuation higher. An October close below the halfway point shows natural gas closing weaker than it might be relative to the month’s trading range. A stronger close shows greater underlying buying strength and increases the chance for a continuation higher.

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