Natural Gas Breaks Near-Term Support and Heads Towards Trendline

Natural Gas Forecast Video for 01.06.23 by Bruce Powers

Natural gas is deepening its correction today as it falls to an 11-Day low. Support was at 2.26 and it fell below that level today. Next, natural gas heads towards potential support of the uptrend line. Currently, the line is around 2.14.

Two Potential Targets from Falling ABCD Pattern

For lower targets, a falling ABCD pattern is drawn on the chart starting from the most recent swing high at 2.69 (A). The 100% completion of the pattern occurs at 2.05. That is a little below the uptrend line. It would be more bullish if support was seen at or above the trendline. However, the trendline covers a short time window so its significance is minor. Nevertheless, the trendline is also marked by the 78.6% target for the CD leg of the ABCD pattern. This is a Fibonacci ratio, and it sometimes marks the completion for an ABCD pattern where the CD leg is 78.6% of price distance from the AB leg. Since it lines up with the trendline, we should pay attention to it.

Trendline Support is Next Lower Target

The ABCD pattern is becoming common for natural gas as it further completes its bottom, or bearish continuation pattern if it falls to new trend lows. Each of the two advances carved out an ABCD pattern. Now it is happening on the pullback. This increases the chance that at least the first D target is reached around 2.14 and increases the chance that the full 100% target at 2.05 is hit. An ABCD pattern was also present on the pullback from the first rally off the bottom of the trend (1).

Strength Indicated Above

At this point, a daily close above last week’s high of 2.45 is needed for clear signs of strength that might see the price of natural gas continue to advance. The current correction will be over by then. Even if the retracement falls to the 2.05 target before a bullish reversal, the uptrend structure of higher swing highs and higher swing lows will remain in place.

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