Natural Gas Weakens, Opening Door to Deeper Correction

Natural Gas Forecast Video for 31.05.23 by Bruce Powers

Natural gas continues to weaken as it further retraces the prior advance. It was down again today and testing the previous swing low of 2.26 as support. So far it has held up as support but looks like there is a good chance natural gas will correct below it before it is done. That low is also a weekly low therefore a drop below it is more significant than if it was not a weekly low. Today’s analysis uses a 4-Hour chart to better look at the detail of recent price action.

Increasing Likelihood of a Deeper Correction

If it keeps falling natural gas would be next encountering support around the uptrend line. It currently converges with a 78.6% target from a falling ABCD pattern. A classic ABCD pattern completes where the CD leg matches the price change of the AB by 100%. However, other Fibonacci levels can also be used. The first being 78.6%. That is where the CD leg completes at 78.6% of the AB leg.

ABCD Extension Targets

Extensions are greater than 100%. Here the 127.2% and 161.8% Fibonacci ratios are used. The target from the CD leg is derived by extending the price distance in the AB leg by 127.2% and 161.8%. The Fibonacci extension tool can be used for this measurement.

As you can see on the chart if the 100% target for the CD leg is reached at 2.05, natural gas will be well below its uptrend line. That would be a sign of weakening. If natural gas can find support around the uptrend line and 78.6% retracement instead, it would offer a more positive outlook for the recovery off lows.

Consolidation May Continue

Until natural gas can close above last week’s high of 2.57, it remains in consolidation mode with the risk of falling further. A daily close above last week’s high indicates strength and that underlying demand for natural gas is improving. Upside targets are plentiful, with the first being around the most recent swing high of 2.69, which is a three-week high.

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