Bullish Reversal Triggers on Monday

On Monday natural gas showed strength as upward momentum kicked in triggering a bullish breakout of the internal downtrend line. The day ended with a wide range green candlestick pattern and a five-day closing high. This is bullish behavior that indicates there is likely more upside to go. A low volatility day following yesterday’s sharp move should be healthy for developing rally. Last week’s high of 2.285 is the next upside pivot.

First Upside Target is the 20-Day MA

There are a couple of initial higher targets that are well identified. Simplified, the 20-Day MA is at 2.36 and it can also be used as a guide relative to the top downtrend line. If that level is broken to the upside, the 200-Day MA comes into sight at 2.43. There are additional price target levels around the 200-Day line that generate an area of possible resistance. They include the 38.2% Fibonacci retracement at 2.45 and a prior swing low around 2.48.

Since the 38.2% retracement is generally considered a minimum potential retracement in Fibonacci analysis, it seems that the 2.45 level has a good chance of being hit. Certainly, given the relationship to the downtrend line, the 20-Day line should be reached at a minimum. Once there was an upside breakout of the internal downtrend line the higher trendline became a target.

Higher Target Zone up at 2.56

Subsequently, if an upside breakout above the 200-Day line can be maintained, the chance of reaching a higher target zone from around 2.56 to 2.59 improves. That price zone comes from the 50-Day MA and 50% retracement, respectively. Notice that an advance above the 200-Day line puts natural gas above the top downtrend line, one indication further confirming a bullish reversal of the recent bearish correction.

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