Break Below 200-Day Average Confirms Seller Control

Natural gas fell below the long-term trend indicator, the 200-day average, on Monday and closed below it thereby confirming the breakdown. Today’s clear bearish response shows the sellers continue to dominate despite a potential bullish hammer candle that formed yesterday. A low-end target is at the lower long-term uptrend line, currently at approximately $3.01. Failure of the 200-day average shows selling pressure at a degree that could see the lower uptrend line eventually reached and possibly lower levels.

ABCD Pattern Targets and Lower Trendline Risk

However, the next lower target zone is around $3.26 to $3.24 (D), consisting of a 78.6% projected target for a falling ABCD pattern and a 78.6% Fibonacci retracement of the full upswing from the August low. Given weakness today, it looks like that target will likely be reached before the bulls take back control. If it fails, then the lower trendline becomes a target. And if that line fails to reverse the descent a 100% projection for the ABCD pattern shows a potential target below the long-term uptrend line at $2.89.

Monthly Support Confluence Near Next Target Zone

It is interesting to note that the 20-month moving average is at $3.31 currently, near the next potential support zone. That means that the monthly chart also indicates potential support around the next lower price zone and therefore enhances the potential significance of that price zone.

Upside Scenarios Require Reclaim of Key Averages

On the upside, a rally above Monday’s high of $3.53 heads towards the 200-day average, now at $3.56. A daily close above the 200-day line would be needed to confirm strength, while Friday’s high of $3.70 being the first upside target, followed by a swing low at $3.80 (B). The 10-day average would then be next. It is now at $3.92 and falling.

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