National Gas Accelerates to the Downside

Natural Gas Forecast Video for 27.01.23 by Bruce Powers

Natural gas triggers a bearish trend continuation falling as much as 11% on Thursday before bouncing off minor support. It fell through two potential monthly support levels of 3.01 and 2.83, from June and May 2021, respectively, before hitting a low at 2.76 low.

The drop saw natural gas break down through the bottom of a declining parallel channel, indicating the fall is accelerating. Nevertheless, where it closes will be telling as to what might come next. At the time of this writing, it looks possible that the day could end with a somewhat bullish candlestick chart pattern.

Lower Support Range

Support for the day was found at the 161.8% Fibonacci extension of the most recent minor bounce. Therefore, it can be considered a minor support zone. However, even though it is a little below another support range it is still close. That range includes multiple Fibonacci levels and the downtrend line across the bottom of major swing lows and goes from around 3.01 to 2.95.

The next lower support area is around prior monthly support from late-2020 to early-2021 from 2.45 to 2.24. That price area corresponds to the next lower Fibonacci confluence zone from 2.45 to 2.42.

Signs of Strength

If a bullish turn comes the first sign of strength is on a rally above today’s 3.00 high and then further on a daily close above the high. For a more significant bullish signal the week’s 3.59 high would need to be exceeded to the upside. Nevertheless, the 12-Day EMA may provide a somewhat earlier bullish signal as it was just recognized the other day as it was touched on a bounce and held as resistance.

The 12-Day EMA trend indicator is now at 3.42, a bit lower than the weekly high. A rally above it and subsequent daily close above it will provide an earlier bullish signal for aggressive traders. Others can wait for the weekly to be triggered.

Closer to Trend Exhaustion?

This is now the third day down where sellers clearly dominated. You can see how each day has relatively wide range candles where price closed near the low of the day, indicating sellers were dominating into the close. This is a sign that bearish momentum has picked up. However, that can change quickly, and it could be indicating short-term exhaustion is getting close. This may be similar to how we can see a spike high towards the end of an uptrend. Of course, in the opposite direction in this case.