Downtrend Remains Dominant

There is the potential for today’s advance to strengthen further and lead to higher prices. Nevertheless, natural gas remains in a clear downtrend, below both the downtrend line and the 20-Day MA. Downward pressure continues to dominate following last week’s bearish close. On a weekly basis, it completed a bearish shooting star candlestick pattern on the weekly chart (not shown).

Moreover, last week closed at the low of the week and below the previous week’s low of 2.015. This is bearish behavior in that time frame. What this analysis seems to indicate is that, if natural gas bounces higher it remains likely to encounter resistance that turns prices back down for a retest of trend lows and possibly a drop through last week’s low.

Below 1.99 Targets 1.94

If last week’s low is busted to the downside, then natural gas looks to be heading towards a possible support zone from around 1.94 to 1.91. The first price level is a prior minor swing high, while the second completes a 78.6% Fibonacci retracement. Further down is the filling of the gap from April at 1.85, followed 1.83 and 1.80. The 1.80 price level is the middle of the bottom symmetrical triangle pattern, while 1.83 completes a falling ABCD pattern where the CD leg of the decline is twice the price change in the first AB leg.

Resistance Likely at Trendline or 20-Day Line

Today’s high of 2.10 is nearby resistance. If there is a bullish breakout above the high then resistance may be encountered around the downtrend line or 20-Day MA, currently at 2.23. However, last week’s high of 2.27 is a key resistance level as a rally above it will trigger a bullish reversal as a lower swing high comprising the price structure of the downtrend correction would be violated.

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