Breaking Out: Natural Gas Gains Momentum for Higher Prices

Natural Gas Forecast Video for 21.07.23 by Bruce Powers

A weekly bullish reversal triggers in natural gas as it breaks out above last week’s high of 2.75. It looks on track to close above the downtrend line today, another clear sign of strengthening. Next, a daily close above last week’s high is needed to further confirm strength and the weekly breakout. That could happen today or the next few days. Once it does, natural gas should be on its way to higher prices unless there is a failure to continue to advance and a bearish reversal.

Uptrend Slope Improving

The angle of ascent of the developing uptrend aligns with the CD leg of the ABCD pattern (purple) on the chart. That line can also be used to help identify potential support on pullbacks. Once a daily close above last week’s high completes the chance for a continuation to new trend highs is possible. Notice that the ABCD pattern completes its initial target at 3.29. That’s where there is symmetry between the AB leg and CD leg of the uptrend on a percentage basis. The target is at the low end of a potential resistance zone from around 3.29 to 3.31, marked by the confluence of several indicators.

Next Target Zone Starts at 3.00

Nevertheless, the next target zone is lower, from around 3.00 to 3.02 or so. The first rally off the bottom (1) of the bottom of the trend at 1.97 in February advanced by 53.9% to the rally high of 3.00. Subsequently, a retracement ensued to a new trend low of 1.95 on April 14 (2). If we look for a measured move advance off the 1.95 low that matches the first rally (1), it completes around 3.02. Given that the first rally high that led to a bearish reversal was at 3.00, there are two indicators identifying the target zone of 3.00 to 3.02.

Buyers Stepping Up

As noted earlier in the week, an advance off the last retracement low shows relative strength compared to the prior two retracements. Support was found relatively higher, around the 50% retracement zone rather than the 61.8% or 78.6%, as seen in the earlier pullbacks. Also, support was found close to support of the 34-Day EMA, rather than further below it as seen earlier.

For a look at all of today’s economic events, check out our economic calendar.