Natural Gas Market Review: Pullback or Reversal?

Natural Gas Forecast Video for 20.04.23 by Bruce Powers

Following a 22.6% rally off the most recent trend low of 1.95 natural gas has pulled back after reaching a high of 2.38. That price level is just shy of the weekly high of 2.43, the next higher target. The high was a four-week high, reflecting growing strength in natural gas and confirming a bullish weekly reversal on two daily closes above 2.25. In addition, natural gas has closed above the 34-Day EMA on a daily basis. This has happened before though so further confirmation of strength relative to the 34-Day line is needed.

Short-term Pullback Healthy for Trend

The rally to date is short so far as it is moving into the fourth day now. So, a pullback to test support zones prior to a continuation higher is normal and healthy for the uptrend structure. There is also the possibility of a bottom being established over a longer period. If so, then a consolidation phase could be in the works.

Expanding Triangle Forming on the Bottom

There is a pattern developing within the bottoming structure that takes the shape of a broadening formation or expanding triangle. This pattern can be a trend continuation pattern or reversal pattern. In this case we’re looking at it as a potential bullish reversal pattern and looking for a continuation of the reversal of the downtrend to an uptrend.

It can best be seen in the intraday 4-hour chart. The trendlines on the border of the pattern are heading away from each other reflecting the expansion of price over time rather than contraction, which is seen in other triangle patterns. Also notice how the recent highs found resistance right around the 200-4Hr EMA.

Watch for False Trend Breakdown

This pattern is being mentioned largely due to the bottom of the pattern. You can see how it is possible for natural gas to fall to new lows while staying within the expanding triangle pattern. It means that a breakout to new trend lows cannot be assumed to continue. Where price is within the expanding triangle will need to be considered. The assumption is for a breakout to the upside given the recent rally following a false breakdown four days ago. It is still early in its formation but deserves to be watched.

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