Hits Three Day High

Given today’s bullish reversal signal, last Thursday’s low of $3.44 established a higher swing low within a near-term uptrend structure that is contained within the developing CD leg of a potential rising ABCD pattern. The ABCD pattern is within a potential bullish trend channel that is highlighted in light green. Support for the bearish pullback was seen last around the confluence of a 50% retracement level, the 20-Day MA, and an AVWAP level from the May swing low (A).

Price Rejected from Strong Support

Given the subsequent bullish reaction from that support zone, natural gas looks poised to challenge and possibly exceed the $3.84 lower swing high (B). A decisive breakout above $3.84 would trigger the ABCD pattern as a higher swing high would be established and a daily close above that level would confirm the breakout.

The first higher target zone is $4.08 to $4.12, consisting of the initial target for the rising ABCD pattern and the 61.8% Fibonacci retracement, respectively. Potential resistance around the top line of the trend channel may also provide clues about supply and demand, particularly if it lines up with another indicator once approached by price.

Right Shoulder a Potential Barrier

If the price of natural gas continues to rise it will eventually encounter potential resistance around an interim swing high of $4.25. That swing high established the right should for a recent head and shoulders bearish reversal pattern. It marks a lower high in the bearish correction that started after the $4.90 peak in March. A violation of that bearish price structure would be bullish and provide another bullish reversal signal.

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