Amidst a healthy retracement of 31.7%, natural gas contemplates a potential reversal, with today's doji signaling indecision near crucial support levels.
Natural Gas Forecast Video for 08.12.23 by Bruce Powers
Natural gas dropped to a new trend low today before finding support at 2.49. A bounce followed back towards the opening price. At the time of this writing today’s candlestick pattern is likely to end with a doji (open and close is the same or almost the same price). A doji indicates indecision. Since it is happening near a prior swing low and a monthly low, the possibility that today may be the bottom of the retracement increases.
Completes 31.7% Decline
As of today’s low, natural gas was down by 31.7% from the recent swing low of 3.64. That is a healthy retracement, the largest since the trend bottom this past April. However, it does not match the decline from the first rally high that peaked in March. That correction was 35.7%. Nevertheless, although today’s price action is the first indication that the decline might be over, further evidence is needed. And the next lower support range is not far down at a price range from 2.44 to 2.425.
Lower Support Levels May Still be Tested
The next lower support range includes the completion of an extended falling ABCD pattern at 2.44. Once the first ABCD pattern target at 2.62 was broken to the downside, the extended completion becomes the next target. Since it has not been completed yet, there remains a chance that it might be hit. A decline below today’s low indicates that it likely will be reached.
Rallies Head into Likely Resistance
On the upside, a rise above today’s high of 2.62 indicates strength. If triggered, natural gas rises into several potential resistance areas. The more significant is the uptrend line along with the 21-Day MA. The 21-Day line has fallen recently to almost touch the trendline today. It is currently at 2.89. The first price level to pay attention to during a bounce is this week’s high of 2.79. A daily close above this week’s high, also a swing high, would need to occur before natural gas has a chance to continue higher. Note that last week’s breakdown of the rising parallel trend channel is also a breakdown of a large bear flag. If so, rallies are more likely to encounter resistance until the two-week high of 2.99 is exceeded.
Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.