Following a lower swing high of $4.25 on March 3, the bearish correction from the recent peak of $4.90 accelerated to the downside. This can be seen as the price of natural gas was rejected from the top of the channel. It then fell back below the 50-Day MA and then the midline (green dashes) of a falling trend channel as highlighted in red. The original channel is bound by blue trendlines, and a 25% extension was added to the bottom with a green lower line.
Over the past several days resistance was successfully tested around the lower blue channel line, and it has held up so far. Once prior support becomes resistance, the downtrend may be ready to continue. In summary, these are bearish signs. Natural gas remains in a clear downtrend and bearish momentum has been increasing.
Sitting on Potential Reversal Zone
Despite the overall bearish indications, natural gas is in a position that could lead to a bullish reversal. A potential support zone around the 88.6% Fibonacci retracement of $3.21 has been tested as support for several days and again on Thursday with a new retracement low of $3.19. It continues to indicate support even though there is a recent series of lower daily lows and is supported by the lower end of the descending channel. Now, on Thursday an outside day was produced as a new trend low was reached earlier in the session followed by a rise above Wednesday’s high.
Strength Signaled Above $3.33
A bullish breakout and possible one-day bullish reversal will trigger on a rally above $3.33. The first stop on the way up looks to be a recent interim lower swing high from Monday. Further up is the 20-Day MA, now at $3.73, followed by another lower swing high at $3.83. Subsequently, the 50-Day MA may indicate signs of resistance. It is now at $3.90.
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