Return to Double Bottom Breakout Signal

A bullish breakout of a double bottom pattern triggered in September with a rally above 2.30, and it was eventually followed by an accelerated advance to the recent swing high of 3.02. That was in an area of potential resistance around the top boundary line of a large symmetrical triangle pattern. Once the top of the pattern rejects price to the downside there is the potential to eventually reach the other side, in this case the bottom boundary line that connects with the second bottom from August 27. Notice that the line is redrawn from the original lower boundary line to account for the higher swing low in August.

200-Day MA at 2.25 is Key

Now, natural gas is in the process of revisiting the neckline of the double bottom to test it as support. However, given the bearish momentum of the descent, down by at least 22.4% from the 3.02 high in nine days, it may give way to a subsequent test of support around the 200-Day MA, now at 2.25. If a test of the 200-Day line fails to find buyers, there is the potential for a drop to test support around the 78.6% retracement at 2.12. And that also opens the door to a potential test of the lower line of the triangle.

Decline is Getting Extended

The expectation is for support to be seen at or above the 200-Day MA. Other than an initial minor test of support at the 200-Day line on September 19, this is the first real test since a bull breakout of the line triggered on September 11. It should hold and lead to an eventual bullish reversal if natural gas is to have a chance to again strengthen and eventually attempt another bullish breakout of the triangle pattern.

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