Natural Gas Technical Analysis: Eyes Bullish Continuation Amid Key Support Tests

Natural gas continued to consolidate on Wednesday as it dipped to a low of 2.13 before finding support. Nevertheless, for the past couple of days it has largely traded with the price range from Monday. Today’s pullback provided another test of support around the 20-Day MA. At the time of this writing natural gas is set to close with a bullish hammer candlestick pattern as it looks to set up for a continuation higher.

Rise Above 2.31 Needed for the Bulls

Potential resistance around the 200-Day MA at 2.31 is near last week’s high of 2.30. This means the two price levels should be watched together for signs of a bullish breakout or resistance. The next upside target zone begins around the 50-MA at 2.35 and the 31.8% Fibonacci retracement at 2.37.

If natural gas can recapture the 50-Day line, it will have a good chance of eventually testing resistance around the top downtrend line. If the recent pullback low of 2.10 (C) continues to hold as support, there is a rising ABCD pattern setting up. It points to an initial higher target of 2.52, which is a match to the 50% retracement level.

Is the Pullback Over?

Alternatively, it may be that Tuesday’s high was a lower swing high. If so, there may be a deeper pullback in store before natural gas moves higher. A breach of this week’s low of 2.52 would provide a signal. Natural gas would then likely be heading towards the 61.8% retracement at 2.04. Such a scenario would satisfy the weekly bearish signal triggered earlier this week.

Monday’s Momentum a Sign of the Future

The bounce off the 20-Day MA on Monday was clearly dominated by buyers, leading a wide range green candle with a close at the high of the day. Similar buyer enthusiasm may be seen again upon a rally above Tuesday’s 2.28 high. The current consolidation phase above support of the 20-day MA is indicative of building energy for the next rally. Therefore, consolidation may continue for a while longer. If natural gas stays above the 20-Day line, it remains in a developing bullish setup. A rally above today’s high of 2.23 would provide the next sign of strength and trigger a breakout of a bull hammer candlestick pattern.

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