Natural Gas Correction May Present a Buying Opportunity

Natural Gas Forecast Video for 20.03.23 by Bruce Powers

Further weakness in natural gas takes it to a new pullback low around 2.44, just below a support zone as marked on the enclosed chart. A 61.8% Fibonacci retracement completed at 2.52. Since today’s low is broken to the downside, it is signaling a deeper correction. The next lower support zone is around 2.37 to 2.34.

Deeper Correction is Indicated as Support Zone Fails

There are several signs that the current correction should eventually resolve itself to the upside. Let’s start with the bigger picture. First, a bullish monthly reversal occurred near the beginning of the month as price rallied above February’s high and closed above the high for a couple of days. February’s candle is a bullish hammer reversal candlestick pattern, which adds to the significance of the bullish breakout signal. The monthly bullish reversal follows a 78.8% correction off the August 2022 high over a six-month period.

Recent Signs of Strength May Return

Price recently rose as much as 49.4% off the trend low of 2.11. Natural gas reached a five-week closing high during the rally. Both the degree of price appreciation and the strong weekly close are signs of underlying strength. Further, there is a bullish divergence between the relative strength index (RSI) momentum oscillator and price. It shows momentum has turned up while price is again testing lows.

A Rally Above 2.64 High Indicates That Strength is Returning

A rally above today’s 2.64 high will provide the first signs of strength. Subsequently, we need to see a daily close above that price level. However, since the two-day high is close by at 2.66 and it is an inside day, a stronger signal is inferred by a daily close at a two-day high.

Upside Target Zones

Once a bullish reversal is back in play natural gas heads first to the 34-Day EMA, now at 2.84. The 34-Day line has done a good job of marketing the border of the downtrend. A new move back above it is a sign of strength. If the 34-Day EMA is broken to the upside, then the prior swing high at 3.16 is the next target. Nevertheless, the first more significant target that is identified on the chart highlighted in red is the 3.44 to 3.56 price zone.