Strong Bearish Momentum

Given the strong bearish momentum seen in today’s wide range red candle, it looks like natural gas may have a plan to test support again around the 20-Day MA, which is currently at 2.64. It is now lined up with a minor swing low, also at 2.64. Together, they indicate stronger potential support than if they were alone. A little lower is the 50-Day MA at 2.59, followed by a prior swing low at 2.51. Either price area may see signs of support.

Risk of Bearish Weekly Pattern

Nonetheless, since there is only one more trading day for the week, if downward pressure remains on Friday, there is a chance natural gas will complete the week with a bearish shooting star candlestick pattern. That would provide a potentially bearish weekly setup heading into next week. Once one side of a consolidation pattern is tested as either support or resistance, there is the potential to eventually test the other side of the pattern.

Natural gas found resistance this week around the top boundary line of a large symmetrical triangle pattern. A bullish breakout of the triangle would occur on a sustained rally above the prior sein high at 3.02. But since resistance was seen leading to today’s selloff, there is the potential to test support eventually near the bottom of the pattern. This doesn’t mean it will do so, but it does indicate selling pressure and that could provide a surprise to the downside.

Key Support Defined by 50-Day MA

Nevertheless, until there is a decisive decline below the 50-Day MA, the likelihood of finding support that leads to a bullish reversal at or above the 50-Day line is the dominant thesis. A drop sustained decline below the 50-Day line would possibly lead to a retest of support around the 200-Day MA, currently at 2.24.

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