Resistance Seen Below 50-Day Moving Average

The day’s high of $3.83 attempted to test the 50-Day MA as resistance following a daily close below line last Friday. Although the recovery above the trendline is positive, the 50-Day line needs to be reclaimed if natural gas is going to have a chance to further strengthen. There is also the 20-Day MA that is a little higher at $3.94. Since the 20-Day line is falling there is the potential for it to drop below the 50-Day line. That would be a bearish sign if it is sustained.

Quick Recover Above Trendline

Since natural gas recovered the trendline in less than two days, and it followed a retracement to a key 78.6% retracement level, an eventual advance to test resistance around the downtrend line seems likely, at a minimum. Notice that support was found yesterday at the lower channel line, and it was again tested today with a brief undercut of the lower channel.

Moreover, although the middle line (dashed) of the channel was exceeded today, natural gas may close at or slightly below that line. If it does so, it will be the second day that the middle line was recognized. Notice that Tuesday’s low found support at the lower end of the channel.

Daily Close Above 20-Day Moving Average Needed for Bulls

Until there is a daily close above the 20-Day MA and the top falling trendline, there remains the possibility that bearish correction has not completed, and further tests of lows could occur. Another drop below the trendline would indicate that it was not successfully tested as support, reflecting continued underlying downward pressure.

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