Bullish Signs Following Descending Wedge Breakout

A decisive bullish breakout triggered on Wednesday as natural gas broke out of a bullish descending wedge pattern. Following the breakout upward momentum stayed strong. Each of the past three days closed in the top quarter of the day’s trading range. The 2.15 daily swing high is also a weekly high from last week. This means a weekly bullish signal was also triggered this week. So, a daily close above 2.15 will also confirm the weekly reversal. It follows seven weeks down from the most recent swing high at 3.16.

Further Rest Possible Before Trend Continues

There could be a pullback before natural gas progresses higher and, in that case, the first price level to watch is the 20-Day MA at 2.09. It was successfully tested as support with today’s low of 2.10. Lower down is the 50% retracement level at 2.04, followed by a price zone around the 2.03 to 2.01 daily lows from Thursday and Wednesday, respectively. That would also be roughly around the top boundary line of the wedge pattern.

Watching for Short Term Weakness

The degree of retracement, if it comes before a bullish continuation, may tell us something about the underlying strength in demand for natural gas. Of course, finding support at or above the 20-Day line and then continuing higher would be the more bullish behavior. Nevertheless, the weekly reversal was just triggered, and it indicates there will likely be a continuation to the rally. What is not clear is the aggressiveness of the rally. A prolonged retracement or consolidation prior to a bullish continuation is possible. But, given the clear bullish breakout this week it is also possible that the bulls maintain control into higher price levels.

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