National Gas Hits New Trend Low as Volatility Dies Out

Bruce Powers
Published: Jan 27, 2023, 20:17 UTC

Natural gas has fallen as much as 63.9% off its late-November high.

Natural Gas, FX Empire

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Natural Gas Forecast Video for 30.01.23 by Bruce Powers

Natural gas dips to a new trend low as volatility diminishes. It looks like the day will most likely end with a narrow range day. If the daily candlestick closes in the green this will be the first time in eight days that natural gas closed higher than it opened. It would also be the first bullish candle in 11 trading days, although barely bullish.

Stalls Out After Dip to New Low

Support for the day was seen at 2.75, which is a new trend low. That’s still around the minor support level at the 161.8% Fibonacci extension of 2.78. The extension is a greater than 100% retracement of the most recent short two-day rally. Resistance on that rally was found at the 12-Day EMA.

If natural gas keeps falling the next support zone of note looks to be around 2.45 to 2.24 or so. That’s near monthly support from back in 2020/2021 and includes several Fibonacci price support levels.

Watch for Signs of Strength

Alternatively, natural gas could bounce back up into resistance of the 12-Day EMA, now at 3.34. That’s 14.7% above the day’s low. A decisive breakout above Friday’s high of 2.91 will provide an early bullish reversal signal for aggressive traders who know how to handle risk.

Certainly, it could keep strengthening from there. Nevertheless, a key bullish reversal, that clearly increases the odds for a continuation higher won’t occur until there is a break above and subsequent daily close above 3.60, the top of the most recent minor swing high. That’s also the week’s high.

Upside Potential

Natural gas has now fallen as much as 63.9% from the November 2022 peak of 7.60. It is arguably overdue for a tradeable bounce if not a decisive bullish reversal. This doesn’t mean it won’t fall further as it looks like it going lower so far. That’s why a clear bullish signal is needed before engaging on the long side.

If it does get going, an initial minimum upside target is around 4.60 to 4.75. That price zone is derived from the 38.2% Fibonacci retracement of the downtrend and prior support, now possible resistance, seen in the swing low from last October.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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