Natural Gas Technical Outlook: A Bearish Continuation or Bullish Reversal?

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Natural Gas Forecast Video for 27.03.23 by Bruce Powers

Natural gas remains stalled within a downtrend and currently testing prior lows. On a technical basis, not much has changed as it continues to trade within the high-to-low range from Tuesday, with a high of 2.49 and a low of 2.24.

Bear Continuation is Possible

You can see in the chart that a series of lower highs has been maintained since the minor swing high at 2.79 from March 14. The series of lower daily lows is not as consistent yet conveys the same bearish sentiment. Support was seen off the 2.24 low from Tuesday as an 88.6% Fibonacci retracement was completed. So far, the first day positive reaction has not been confirmed by additional signs of strength. Instead, weakness is represented by the continuation of consistent lower daily highs.

A decisive decline below this week’s 2.24 low triggers a likely bearish continuation of the downtrend, which is then confirmed further on a drop below the 2.11 trend low. Lower possible targets include 2.05, 1.98 and 1.73.

The Obvious is Suspect

Of course, the bear trend is obvious to all as well as the market expectation for lower prices. Nevertheless, sometimes when a market looks obvious, something different happens. That’s why we also need to be prepared for the bull case. If natural gas turns higher rather than lower, the potential for a rapid sharp rally is a possibility.

The most recent rally off the current trend low (A) saw natural gas advance as much as 49.4% in only seven days. That’s attractive to many market participants. If we come up from this week’s low there is a real chance for a rally to the recent swing high of 3.16, at a minimum. Strength was clearly exhibited in that first leg up off the trend bottom. If a second leg up begins, similar aggressive behavior might be exhibited.

Bullish Case

Although there are no clear bullish signs, the 14-Day RSI is showing a bullish divergence with price. An uptrend line has been added to the RSI to better visualize the situation. Momentum represented by the RSI is trending up, while price continues to trend down. By itself, this is not enough to act. However, if signs of strength start to occur with moves above daily highs and especially this week’s high of 2.52, natural gas could be back in play.

This article was originally posted on FX Empire


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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