Downtrend Line Marks First Line of Resistance

The internal downtrend line marks dynamic resistance for the current bear trend (retracement) as a rally above it will provide the first sign of strength that could lead to additional confirmation of strength. However, once today is complete, a rally above today’s high provides a short-term bullish indication. Upside follow through would then be key. Yesterday’s high was 2.21. It is fair to say that a sustainable bullish signal is not likely until natural gas rallies back above that high. That is as it stands now.

Initial Upside Target from 2.44 to 2.47

If a rally can get moving, an initial upside target for natural gas looks to be around 2.44. That begins a potential resistance zone up to 2.47, marked by several indicators. Both the 200-Day MA and 20-Day MA are at 2.44. A prior swing low support level, now potential resistance, lies around 2.47. Further, the downtrend line converges with this price area. But it doesn’t end there. The 38.6% Fibonacci retracement of the decline is within the zone at 2.45. Finally, notice that the most recent minor internal upswing caught resistance on July 9 at 2.45.

Below 2.00 Targets 1.92

Although there are reasons to suspect that the 2.02 to 2.00 price zone may continue to act as support, followed by a rally, the 61.8% Fibonacci retracement was exceeded to the downside on Monday. That opens the door to the 78.6% Fibonacci retracement at 1.92. The 2.02 to 2.00 price zone is derived from the completion of a descending ABCD pattern extended by the 161.8% golden ratio. It is anchored by a prior swing high from early-March at 2.00, which is also the top of a bottom symmetrical triangle pattern.

For a look at all of today’s economic events, check out our economic calendar.