Next Lower Support at 61.8% Fibonacci Retracement of 1.71

If natural gas does break below the current support area it likely heads towards the 61.8% Fibonacci retracement at 1.71. Certainly, that would indicate a failure of the 20-Day MA to maintain support. Also, the 78.6% Fibonacci retracement is at 1.63. Notice that the short-term 8-Day MA line has turned down since Friday, thereby providing an indication of weakness. An initial rising ABCD pattern completed last week at the 161.8% Fibonacci expansion target of 2.02. Last week’s high was 2.01. The subsequent reaction of price tells us it is done. Therefore, the market needs to set up for the next potential advance. A retracement low may still be established near today’s low, or a drop to lower price levels comes first.

Bullish Reversal Anticipated Once Retracement is Complete

Nonetheless, the recent swing low from February 20 is a solid low and there remains the possibility that the rally off that low will continue once the developing up trending pattern expands with a new swing low. In other words, the price swings within the developing uptrend becomes larger. Today’s low may be that bottom or the lower levels noted above may be hit first. In general, staying above the 20-Day line shows greater underlying strength than trading and closing below the line.

Breakout Above 1.84 is Bullish

Regardless of the above analysis, a decisive breakout above today’s high of 1.84 provides a bullish signal. If it holds natural gas should rally into last week’s high zone to test it as resistance. An upside breakout above last week’s high of 2.01 confirms strength and thereafter a higher potential target comes into view. The next higher key target has been identified around 2.23. That is where the December swing low was and the 38.2% Fibonacci retracement of an internal downswing. The 50-MA was also at that price earlier but it has come down some to 2.22.

For a look at all of today’s economic events, check out our economic calendar.