Analyzing Natural Gas: Will the Recent Rally Continue or Retreat?

Natural Gas Forecast Video for 05.07.23 by Bruce Powers

Further consolidation for natural gas as it tries to work out its next move. Last week completed a 34.7% advance in 18 days to top out at 2.88. The question is whether that high was the end of the current rally, which will lead to a retracement, or whether the rally still has legs and can get above last week’s high.

Last Week’s Completed 34.7% Advance

There is reason to believe that last week’s high was the high for now. It completed a 34.7% advance in natural gas from the June 1 swing low (C). In addition to reaching several price targets derived from multiple technical methods the advance exceeded the previous two rallies of 32.2% and 30.0%. Therefore, on a relative performance basis it has risen to a point where the chance for a correction clearly increased.

Rise Above Three-Day High for Bullish Signs

Resistance is at the three-day high of 2.63. A rally above followed by a daily close above that high needs to occur to trigger a bullish signal. If so, then natural gas would have a chance of exceeding last week’s high and moving to the next potential resistance zone as highlighted in red on the chart.

It goes from approximately 2.97 to 3.02 and includes the completion of a measured move at 3.00 and a prior swing high at 3.03. That prior swing high ended a sharp 53.9% advance in only seven days. The current advance has already failed to match that previous rally based on time as we are at 18 days for the current rally. Nevertheless, there is still a chance for it to match the performance starting with a break above 2.63.

Lower Prices Triggered Below 2.63

Support is at the three-day low of 2.63 and the four-day low of 2.62. Since they are so close, we’ll consider the 2.62 price level. If busted to the downside natural gas next heads towards the 50% retracement and 34-Day EMA at 2.51. Still lower is potential support around the 61.8% Fibonacci retracement at 2.42. The key is that the uptrend line needs to hold up as support. It has defined strength within the rising trend channel since the April low at 1.95.

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