Natural Gas Hits Trend High: Will Bullish Momentum Persist?

Natural Gas Forecast Video for 05.10.23 by Bruce Powers

Natural gas advanced to a new trend high of 3.055 today before sellers moved into control leading to a retracement. The high completed a rising ABCD pattern extended by the Fibonacci ratio of 127.2% (D), a logical spot for the advance to culminate, at least in the near-term.

Weak Close Likely

Following the new trend high, it looks like natural gas will close in a weaker position than it might, heightening concern that the breakout may quickly fade. Since reversing down from the 3.055 high earlier in the session it has declined to below the halfway mark (2.995) of the day’s range.

And it may close below it. A bearish inverted hammer candlestick pattern is possible given where natural gas is trading at the time of this writing. It shows sentiment switching from being clearly bullish to bearish within one day. This doesn’t mean the bearish sentiment continues into tomorrow unless there is a decisive drop below today’s low of 2.935.

Clues Seen in Close Relative to Day’s Range

Where natural gas closes relative to the prior trend high of 3.02 can provide clues about price behavior. It has dropped back below the prior trend high of 3.02 and will likely close below it. A close above that swing high is needed to confirm strength seen in the upside breakout earlier in the session, while a close below is supportive of a short-term bearish scenario unfolding.

Breakout of Long-Term Downtrend Line

Today’s advance took natural gas back above and away from its long-term downtrend line for the first time. A bullish daily close occurred above the line yesterday, which was a sign of strength and a change from closing below the line. That was the first daily close above the line. Then today, bullish sentiment improved leading to a new trend high and a likely second daily close above the line. Therefore, we want to watch how the price of natural gas behaves if it tests the trendline as support. Does it behave as support and lead to a bullish price reversal? Or does price drop right through it? The bullish scenario should see prices held at or above the line.

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