Short-term Strength Faces Overhead Pressure

Although natural gas is rebounding today, its reaction to upcoming resistance will be more telling about the potential future. Possible resistance around the 200-Day MA, now at $3.43, is the first price area to consider. But it can be combined with Monday’s high of $3.47 and the 50-Day MA, now at $3.53, to establish a price zone.

The moving average is being referred to recognizing that it is generally less useful in a consolidation environment since it is a trending indicator. That is because the AVWAP line measured from the April swing low is pointing to the same price level currently. And the 20-Day MA is heading towards a convergence with those lines as well.

Key Resistance at $3.57

Nevertheless, it looks like an interim lower swing high of $3.57 is the next higher potential resistance of level with the most significance. This is because the downtrend price structure of the second leg down from the June swing high will be violated. Further, a rally above that high will follow an advance above the lower potential resistance levels mentioned above.

Distribution Risk Rises

There were enough bearish signals recently to consider the potential for a lower target zone to be reached following a bounce. Several indicators point to a possible lower target of significance around an AVWAP level at $2.96. That price area is near a long-term uptrend (purple) started from the April 2024 low. It has potential significance given its long-term position and the fact that it is the lower line of a rising trend channel. Since resistance around the top channel line was confirmed by the decline that followed the March trend high, the lower channel line becomes a potential target.

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