Analyzing the Strength of Natural Gas: Bullish Reversal Signals and Target Levels

Natural Gas Forecast Video for 13.07.23 by Bruce Powers

Natural gas goes outside day as it hesitates, trying to decide the next course of action. Today was a down day as it attempts to rally following the completion of its recent retracement at a low of 2.54. That low completed a 61.8% pullback, and it is a logical place to bottom. The subsequent advance has further confirmed a bullish reversal as yesterday closed above the short downtrend line and at a six-day closing high.

Rising Moving Average

On June 15 natural gas broke out above the 34-Day EMA (orange) with enthusiasm, closing near the high of the day and completing a wide range green bar. Since then, it has managed to stay above the 34-Day line after being tested as support on two occasions, including the most recent three days ago. This behavior of price relative to the 34-Day line shows improving strength. Further, the line has switched from angling down to turning up.

Breakout Above Today’s High of 2.75 Provides Bullish Signal

Today’s pullback should be short-term with the developing uptrend continuing higher. However, confirmation is needed. In preparation for Thursday, a breakout above today’s high of 2.75 signals a bullish continuation. The first prime target is around the 3.03 peak from the beginning of March. That is where the first rally (1) of 53.9% ended. During that advance natural gas rose by 53.9%. That first target is also at the completion of a measured move where the second advance off the bottom (2) has the potential to at least match the appreciation seen in the first advance. Of course, the time component is very different as the first rally completed in only seven days.

Consolidation Risk

Regardless of the above analysis, further bullish signals are needed. There is always the possibility that instead of trending higher, natural gas moves into a consolidation phase where it chops around within a range for some time. You can say that has been happening since the first bottom (1), however even though prices would swing up and down the price action did occur within a rising trend channel. So, there was an underlying direction.