Natural Gas Fails to go Higher Yet is Primed for a Second Chance

Natural Gas Forecast Video for 01.08.23 by Bruce Powers

Natural gas tried to go higher today with an advance above Friday’s high of 2.69. Monday’s candlestick creates a higher daily low and higher daily high but until there is a daily close above 2.69, strength indicated by the breakout is not confirmed. Today’s low hit support at 2.61 (34-Day EMA is at 2.60), right at the internal uptrend line. The previous two days dipped below the line first before closing above it. So, the advance above Friday’s high plus support being seen at the line instead of below it, are two pieces of evidence to support the idea that underlying demand in natural gas is slowly improving.

Confirmation for Today’s Daily Bullish Signal

Since there are not yet signs of a confirmed bullish reversal the chance for another test of recent support (2.55) or a deeper retracement are a risk. Nonetheless, the correction found support last week at the 78.6% retracement (2.55) and price was rejected to the upside.

That behavior says the correction is likely over. The bias is now to the upside but that could change with a drop below today’s low. It is now not just the low of the day that is important but also the internal uptrend line. The longer trend line starting from the April bottom has not been tested during the current retracement. That could change if the 2.55 swing low is exceeded to the downside.

Monthly Breakout Sets Up

Let’s step back a minute to look at the longer-term monthly chart. July complete as an inside month with June. Therefore, key monthly support is around June’s low of 2.48 and resistance at 2.79. Once a daily close completes above the monthly high the bullish breakout is confirmed. This doesn’t mean we go straight up but rather it is a piece of evidence supportive for strengthening in the price of natural gas. Also, a warning to be on the lookout for that breakout and to watch subsequent price action. Following a breakout does natural gas keep going or stall out. Are the new signs of increasing demand following the breakout? These are a couple questions to try and answer following such a move.

For a look at all of today’s economic events, check out our economic calendar.