Natural Gas: Assessing the Retreat and the Road Ahead

Natural Gas Forecast Video for 11.01.24 by Bruce Powers

Natural gas retraces its prior gains on Wednesday after reaching the 78.6% Fibonacci retracement on Tuesday and encountering resistance. Trading on Wednesday occurred inside Tuesday’s trading range. Support was seen off the day’s low of 2.96, which completed a 38.2% Fibonacci retracement before bouncing.

Moving into Correction

Yesterday’s high is probably the high for now as it completed a sharp 49.8% Advance in only 17 days. Such a move shows strength, but digestion of gains via a pullback and/or consolidation seems like the most likely scenario to unfold next. Potential support of the uptrend line (previous resistance) failed today, and natural gas is likely to close below the line thereby increasing the chance of retracing to lower support levels. Today’s bounce off the 38.2% Fibonacci level, along with yesterday’s top at the 78.6% Fibonacci zone, shows the market recognizing Fibonacci levels.

The next two lower levels of 2.81 for a 50% retracement and 2.68 for a 61.8% retracement, are shown on the chart. Further, there is a level at 2.88 (black horizontal) that has been recognized by the market in the recent past, including on one day on the way up.

Monthly Bullish Reversal Confirmed

There have been several bullish signs recently that should be highlighted. Last week, a bullish reversal triggered on the monthly chart on a move above December’s high of 2.84. And it was confirmed by a weekly close above that high at 3.03 last week. During the subsequent advance natural gas has recaptured its moving averages after falling below them during the correction.

Moving Averages Show Improving Outlook

Moving averages, in this case, identify potential dynamic support levels for the short (20), intermediate (50), and long-term (200) trends. As prices rise above a moving average it reflects the underlying strength of demand. Of course, the long-term being the most significant. This means that, for a bullish outlook, the price of natural gas needs to stay above the 200-Day line during a correction. It is now at 2.64. Moving ahead, watch for the 20-Day MA to cross back above the 200-Day line as a sign of strengthening. Moreover, additional signs of strength will be indicated when the 50-Day line or 200-Day line starts to turn up.

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