Downside Risk Remains

Bearish behavior today did not confirm that one-day bullish reversal breakout that triggered yesterday. It puts recent support, with a low of $3.29, at further risk of being broken. But Wednesday’s low of $3.37 would need to fail before Tuesday’s low is approached. In addition, notice that the 50-Day MA (orange) shows an area of resistance near Thursday and Wednesday highs. There has been no confirmation of strength with a daily close above that line. Although natural gas is holding a significant support area, it needs to turn up and stay up.

200-Day Line Remains Under Pressure

This is the third time since April that support around the 200-Day line has rejected price to the upside. That behavior adds to the significance of the long-term dynamic trend indicator. Therefore, a decisive drop back below that line shows a failure of the 200-Day MA as support and a breakdown from a significant support level.

Looking at the bigger picture of the current advance shows similar characteristics to a bear flag. Therefore, the breakdown of the 200-Day line is also a bearish trigger for the three-month rising trend channel. There is potential trendline support nearby though and a continuation lower could quickly find support. If not at the line, then certainly the 78.6% Fibonacci retracement area at $3,134

Rally Above $3.57 Will Show Bulls Back

The next bullish sign will be on a rally above today’s high of $3.57. If strength continues from there, an interim swing high at $3.75 is next in line, followed by the first May swing high at $3.84. But a clear reversal from the bottom channel line has the potential to rise towards the top of the channel. There are several Fibonacci levels nearby from $5.35 to $4.46.

For a look at all of today’s economic events, check out our economic calendar.