20-Day Line Tells a Story

The relationship to the price of natural gas and the 20-Day MA tells a story over the past few days. Notice that Monday ended above the 20-Day line and yesterday’s close was below the 20-Day line. At the time of this writing natural gas is on track to close weak, in the lower third of the day’s range and again below the 20-Day line. Since the line had shown support during the trend’s rise, successful tests of the 20-Day line as resistance continue to keep the possibility of a deeper retracement as a possibility.

Further Weakness Below 2.635

A break below Monday’s low of 2.635 is a sign of weakness, and it opens the door to a deeper retracement. However, a dip below Tuesday’s low of 2.70 will provide an earlier signal of pending weakness. On the downside, the initial target is the 200-Day MA, currently at 2.47. Also, the 50-Day MA is a little lower than the 200-Day line at 2.43.

Recovery from Shallow Retracement is Bullish

Notice that Monday’s low found support near the 78.6% Fibonacci retracement level of the internal upswing. However, the larger upswing has a minimum 38.2% Fibonacci retracement of the full trend 2.55. It provides a potential support area that is above the 200-Day line. The fact that the recent retracement found buyers before testing support of the 38.2% Fibonacci level is a sign of strength. That is, if it follows through with additional bullish signals. Once there is a daily close above 2.95, natural gas would have cleared an important price level to indicate that the trend is indeed improving.

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