Despite Relentless Selling Natural Gas Has Corrected Slightly More Than Average
Natural Gas Forecast Video for 03.02.23 by Bruce Powers
No letup in the selling so far in natural gas as it dips to a new trend low of 2.43, just shy of an 88.6% Fibonacci retracement of the larger uptrend at 2.42. Volatility diminishes as the day’s price range narrows. At the time of this writing natural gas was sitting near the bottom of the day’s range pointing to further downside in the near-term.
As of today’s low, natural gas has corrected 75.8% off the August 2022 high of 10.03. It took 23 weeks to arrive at its current position. So far there is no reason given by the market that it wants to go higher, therefore we can anticipate further downside until bullish evidence shows up.
Relative Performance of Current Correction
When put into historical context the current correction looks normal. Since December 2000 natural gas has had at least eight corrections of a greater than 60% decline, including the current one. The maximum decline during a correction over that greater than 20-year period has been 82.4% and the lowest 68.9%. A loss of 73.8% was the average.
This means that the current correction is just slightly greater than the average. To match the maximum drop natural gas would need to hit around 1.78. That’s 0.67 cents or approximately 27% lower than the current price of 2.45.
Measured Move Target
Nearby to the 88.6% retracement is the completion of a measured move chart pattern at 2.33. The first and second legs down of the measured move are marked in purple arrows on the chart. Here we are anticipating that the price depreciation of the second leg down (2) will at least match the decline of the first leg (1). This is a minimum expectation as it can always drop further.
Natural gas moved back into oversold territory last week and it continues to move lower, falling to 25.06 on Thursday. That’s the most oversold since the 24.46 RSI level reached six years ago in 2017.
The bottom line is that the technical are showing natural gas to go lower but that could change quickly as it approaches the next price levels that could lead to an eventual bottm.
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