The bulls must rise above 2.31
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 starts around the 50-day MA at 2.35 and the 31.8% Fibonacci retracement at 2.37.
If natural gas can reclaim the 50-day line, there is a good chance it will eventually test resistance around the upper downtrend line. If the recent pullback low of 2.10 (C) continues to hold as support, a rising ABCD pattern will form. It suggests a first higher target of 2.52, which corresponds to the 50% retracement level.
Is the retreat over?
Alternatively, it could be that Tuesday’s high was a lower swing high. If so, a deeper decline could be in store before natural gas continues higher. A break of this week’s low of 2.52 would provide a signal. Natural gas would then likely head toward the 61.8% retracement at 2.04. Such a scenario would fulfill the weekly bearish signal that was triggered earlier this week.
Monday’s dynamic is a sign of the future
Monday’s bounce off the 20-day MA was clearly dominated by buyers, resulting in a wide green candlestick with a close at the day’s high. Similar buyer enthusiasm could be seen again on a move above Tuesday’s high of 2.28. The current consolidation phase above the 20-day MA support suggests an increase in energy for the next move higher. Therefore, the consolidation could continue for a while. If Natural Gas stays above the 20-day line, it remains in a developing bullish setup. A move above today’s high of 2.23 would provide the next sign of strength and trigger a breakout from a bull hammer candlestick pattern.
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