Higher swing low is bullish
After today’s decline, natural gas should be ready to continue higher. Monday’s low at 2.10 created a higher swing low compared to the early August low at 1.88. It was the first decline after a bullish reversal from the 2.10 low. In other words, it looks like an uptrend is still in its early stages and has plenty of upside potential. The 20-day line at 2.10 remains critical short-term support for the uptrend and provides the C-point for a rising ABCD pattern.
Today’s weakness should shift to the upside as there are recent signs of strengthening in natural gas prices, including the breakout of the falling wedge three weeks ago, a move above the 20-day moving average followed by a successful test of the line as support, and the move above the interim swing high of 2.39 last week. Together, these signs indicate an uptrend.
Bullish signal above 2.25, then 2.30
A move above today’s high of 2.25 will be a sign of strengthening, which should be followed by a breakout above last week’s high of 2.30. Once that happens, the 200-day MA at 2.32 becomes the target. However, note that the 200-day line has been slowly declining towards the high of 2.30 recently, putting it very close to last week’s high. Therefore, using the 200-day line as a breakout level may provide greater confidence that a breakout would be followed by rising prices.
Above the 200-day MA is the 50-day MA at 2.36. It is confirmed by the 38.2% Fibonacci retracement at 2.36. If natural gas can rise above it, it will likely attempt to reach an initial target for a rising ABCD pattern, with the C-leg starting from the recent swing low at the support of the 20-day MA.
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