Can Momentum Be Sustained?

Today’s advance won’t mean much unless it leads to a breakout above last week’s high of 3.56. If that can trigger, then natural gas heads next towards the 2023 swing high of 3.64. Subsequently, if it can keep rising, it heads towards the completion of an 127.2% extended target for a large rising ABCD pattern (orange) at 2.67. Higher targets can be considered if the 2023 peak is exceeded.

Rising Channel Guide

A parallel line has been added to the top of the near-term rising trend channel by anchoring with the October 30 swing high. It is interesting to note that last week’s high found resistance just below that top parallel trendline. Nonetheless, the next higher target zone is anchored by the 3.64 peak and includes two pattern extension targets with a high of 3.67. Interestingly, natural gas could rally to that target zone yet stay contained below the top channel line.

Caution Warranted

Regardless of the above bullish scenario, Friday’s bearish engulfing day indicates caution is warranted. In other words, patterns within the parameters of Friday’s range may have difficulty following through as they might in a different trading environment. Conditions may be like what is seen within a consolidation price range. Friday’s price range included support at 3.07 up to resistance at 3.56.

A decline below today’s low of 3.39 would be a sign of weakness that could lead to lower prices. It is followed by Monday’s low of 3.26. Falling below Monday’s low would trigger a failure of today’s upside breakout from an inside day. It is not uncommon to see a pickup in momentum in response to false moves, which could easily lead to a test of yesterday’s low or a drop through it to either 3.02 or 2.93.

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