Natural Gas Price Analysis: Test of 200-Day EMA for Bullish Breakout Up Next

Natural gas found support for the current retracement at a low of 2.86 yesterday. It is in a price zone marked by a prior swing high and multiple weekly highs, the 61.8% Fibonacci retracement, and the 50-Day EMA. The price zone is identified from around 2.90 to 2.86 while the low of the retracement reached yesterday is 2.86. Today, a bullish reversal triggered as natural gas advanced above yesterday’s high of 2.95 and reached a three-day high of 2.98 before encountering some resistance. It is on track to close strong, near the high of the day, and possibly at a three-day high, which is at 2.98.

First Test of 50-Day EMA Support is Successful

This is first test of the 50-Day EMA as support since natural gas rallied above it on a large gap up on September 27. So far, it looks like it may continue to act as dynamic support given today’s rejection of price to the upside. If so, it would be supportive for the longer-term trend. You can see how natural gas has been attempting to move above and away from the 50-Day line starting in May.

That is when trading first occurred above the 50-Day line after trading had been taking place below it since December of last year. Subsequently, a consolidation phase followed where the 50-Day line was not helpful as it is a trending indicator and trading rotated both above and below the line.

Improving 50-Day EMA Supports Bullish Outlook

If the 50-Day EMA continues to behave as support going forward, the outlook for natural gas should further improve. As natural gas moves up and out of the consolidation phase it points to a pickup in demand and possibly an increase in the slope of the developing uptrend. The angle of ascent since the April trend low has been relatively low as natural gas looks to complete a bottom.

200-Day EMA Resistance at 3.17 (or breakout?)

Next up is a test of the 200-Day EMA, now at 3.17. How the price of natural gas reacts around that potential resistance zone will be telling as to the strength of the uptrend following today’s bounce off a support zone. Does it stall the ascent or behave as resistance leading to another test of the 50-Day EMA and possibly it breaks below this week’s support zone with a low of 2.86. A daily close above the 200-Day EMA will confirm a breakout. Then, we want to see further signs of strength indicating that the breakout should be successful and be followed by higher prices. Seeing the 50-Day EMA cross above the 200-Day EMA is one example of a sign that strength is improving.

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