Natural Gas Continues to Test Lows While Momentum Shows a Bullish Divergence

Natural Gas Forecast Video for 04.04.23 by Bruce Powers

Following the completion of a weekly bullish hammer candlestick pattern last week, natural gas dips lower but stays within last week’s range. The downtrend remains intact even as downside momentum slows with price trading essentially sideways for the past eight day.

RSI Bullish Divergence

As natural gas further tests recent trend lows the 14-Day RSI momentum oscillator has maintained a small uptrend marked by the uptrend line in the chart. Such a bullish divergence may be an early sign for an upside bullish reversal. This is not enough on its own for a signal, but it does indicate that it may be worth being ready in case natural gas starts to strengthen rather than weaken further.

Is Upside Signal Possible?

A breakout above last week’s high of 2.24 will provide the first solid signal for a possible bullish reversal. That high is essentially the high of the past eight days. Once natural gas sees a daily close above that high, the breakout of the bullish weekly hammer candle is confirmed. Whether natural gas continues to chop around at that point or rally remains to be seen. Following a breakout, Initial Fibonacci retracement levels can then be watched as near-term targets along with the 34-Day EMA, now at 2.48. You can see how the price area of the 34-Day line was seen as resistance during the last rally.

If Trend Continues Lower

Until then natural gas can be anticipated to chop around within last week’s range unless it breaks through the bottom instead of the top. In this case, a drop below last week’s low of 2.00 triggers a bearish continuation. A daily close below that low will confirm weakness, that could soon test the February trend low at 1.97.

Lower levels to watch for potential support include a prior swing low at 1.79/1.80, followed by the 127% Fibonacci extension of the most recent rally. Other Fibonacci extensions of the same rally include the 1.414% extension at 1.53, followed by the 161.8% extension at 1.31.

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