Underlying Demand Remains but Correction Risk Grows

Since natural gas continues to retain support around the prior resistance level, which reflects underlying demand, it remains in a position to potentially continue the rising trend before a deeper pullback. However, there is one more trading day to the week and the current weekly candlestick pattern is showing a bearish shooting star. This is bearish if triggered to the downside. But since the week is not yet complete another day is needed to see if the bearish pattern remains. Today’s low at 3.54 is currently the low for the week.

No Surprise if there is a Deeper Pullback

A new high for the rising trend was established at this week’s high of 4.20. It was quickly met with stronger resistance, which led to weak close on the new high day, as sellers moved to take back control. They remained in control on Tuesday as seen by the weak close. Today is the second day showing a lower daily high and lower low.

If natural gas sees further weakness, there are several price areas to watch for potential support. The 20-Day MA at 3.46 is next in line on the downside. It can be watched along with the rising internal trendline, along with the 78.6% retracement and most recent swing low at 3.28.

Bearish Reaction Following 4.20 Trend High

Given the bearish reaction following the 4.20 trend high it wouldn’t be surprising to see more of a pullback and/or consolidation before natural gas is ready to proceed higher, if it is to do so. And given the recent long-term bullish signal as noted above, triangle breakout and long-term trend continuation signals, once a correction is complete higher target remain a possibility of being reached. However, a sustained drop below the 3.29 swing low would put the bullish scenario at risk in the near-term.

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