Breakout Above 50-Day Moving Average Needed

Potential resistance around the 50-Day MA lurks just above today’s high at 2.40. It can be considered along with the interim swing high of 2.44, thereby generating a potential resistance zone from 2.40 to 2.44. Once the 50-Day line is exceeded to the upside, natural gas will have a chance of continuing to rally. In general, Fibonacci ratio analysis considers the 38.2% retracement as a minimum normal retracement. Natural gas reaches its minimum 38.2% retracement target at 2.52.

Correction of 26.8% May be the End

Monday’s low of 2.21 completed a 0.81 point or 26.8% correction from the 3.02 swing high reached in early-October. During the decline, the 61.8% retracement at 2.31 was broken to the downside before support was seen from the 2.21 low, a little shy of a 78.6% retracement at 2.12. Given the sharp drop and signs of support at a potentially significant support zone, it looks like there is a real possibility of a bottom. However, further signs of strength are needed, starting with a clear bullish reversal.

Decisive Breakout Above 2.375 Needed

A more decisive bullish breakout than seen today is needed next with a rally above today’s high of 2.375, followed by a daily close above the high. Subsequently, upward momentum should improve at that point if the reversal takes hold. Yet, yesterday’s wide range day may lead to further backing and filling before the ascent kicks in. Until there is a daily close above today’s high the potential for lower prices and possibly a continuation of the downtrend remains. If the 2.21 fails to retain support, the 78.6% retracement at 2.12 becomes the next lower target.

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