Navigating Natural Gas: Breakout Signals Amidst Downtrend

Natural Gas Forecast Video for 19.12.23 by Bruce Powers

Natural gas triggers a weekly breakout on Monday’s rally above last week’s high of 2.54. Last week completed a bullish doji hammer bottom and it triggered today. A daily close above that high will confirm strength indicated by the breakout, while a close below last week’s high show a close weaker than it might be.

Retracement into Last Week’s Range Likely

Nevertheless, last week’s trading range is relatively wide and a dip back into that range prior to a continuation higher could occur before a continuation higher. Monday is the fourth sequential day up for natural gas and some degree of pullback would not be surprising prior to higher prices. Moreover, at the time of this writing natural gas is weakening again and trading at its lows of the day. It is possible it completes a bearish shooting star candlestick pattern today, with a bearish signal given on a drop below today’s low.

If a retracement off today’s high of 2.60 occurs prior to upside follow-through, it should set up a good risk/reward scenario for market participants to take advantage of the likely eventual advance above today’s high. That is of course if it does not drop below the recent swing low of 2.235 first.

Downtrend Intact

Natural gas remains in a clear downtrend marked by the declining internal trendline and 20-Day MA (purple) line. A daily close above either of those lines will be a sign of strength as natural gas rallies back to test prior resistance areas as support. The 20-Day line is currently at 2.66. The big picture is bearish given the breakdown of a larger bearish flag pattern in late-November, which is why a reversal back down can be anticipated once higher resistance areas are tested.

Eventual Test of 2.88 Resistance Anticipated

The highest test of resistance would occur on a rally up to the lower trend channel line. What price would be represented will depend on when it is reached. However, there is a price level around 2.88 that would provide a lower test of resistance, possibly of some significance. That price area has been recognized by the market several times recently and it is interesting that the convergence of both a rising and falling trendline, plus the 20-Day line cross near there.

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