Strengthening Above 3.91

On the upside, a bullish reversal would be indicated on a rally above today’s high of 3.91. Natural gas would then be heading up into a potential resistance zone defined by the prior six days of price history. The bull trend does not continue until there is a rally above the recent trend high of 4.37. In the meantime, natural gas needs to contend with a possible deeper pullback as trend support is being threatened.

Bullish Medium-Term

The medium-term outlook for natural gas remains bullish given the breakout of a large symmetrical pattern in the second half of November. That breakout was accompanied by a bullish trend continuation signal and followed by a trend reversal signal on the advance above the lower swing high of 3.64 on December 20. These are all bullish signals for the medium-term.

In the short term, natural gas could still correct further as a normal component of a bullish trend continuation pattern of an advance followed by profit taking and a pullback. However, until the lower end of the support zone noted above at 3.64 is broken to the downside, the possibility of a continuation higher remains.

Deeper Correction Remains Possible

A continuation of the bearish correction on a decisive drop below 3.64 will put natural gas in a position to test support around a price zone from 3.52 to 3.51. That zone consists of the 127.2% extended target for a small falling ABCD pattern and the 61.8% Fibonacci retracement level, respectively. Moreover, last week’s high of 4.33 generated a lower swing low and possible second top of a double top pattern.

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