Natural Gas Price Compression May Lead to Consolidation Prior to a Breakout

Natural Gas Forecast Video for 18.09.23 by Bruce Powers

Natural gas continued its bearish retracement today with a decline to a low of 2.64. That’s a clear test of support at the 34-Day EMA and two-day low. Each of those two levels points to 2.64. If natural gas can close at or above 2.64 today, it will have stayed above the internal uptrend line and above the three-day low of 2.64. Nevertheless, if the retracement continues the four-day low at 2.60 will likely be tested.

Failed Breakout Drives Retracement

Yesterday’s swing high of 2.82 quickly saw distribution pickup leading to today’s continuation of the decline. It created a new and lower swing high, the partial definition of a downtrend. Given today’s bearish follow-through the possibility of a deeper retracement prior to an advance is increasing. If the bearish decline surpasses the 2.60 low to the downside, lower prices are likely to follow. The intersection of two trendlines is at 2.56, and an area of interest for buyers. Moreover, weekly support is around 2.54.

Recent Swing Highs are Each a Target Upon Bullish Reversal

Upon a bullish reversal, prior swing highs denote potential resistance and upside targets. They include this week’s swing high at 2.82, followed by a swing high from August 31 at 2.865, and finally the trend high 3.02. Further, there are two targets indicated by a rising ABCD pattern, where we anticipate that the CD leg of the advance matches the price appreciation seen in the first leg up, shown as AB. It completes at 2.94. The 127.2% extension of the CD leg of the pattern completes at a new trend high of 3.06.

Price Compression May be Followed by Sharp Move

You can see how the high and low swings in natural gas are starting to narrow as the price range compresses or narrows. What comes after price compression is usually a clear and sharp move in a direction. In other words, trending. There are several trendlines on the chart that illustrate the compression of price. It is where an uptrend line crosses a downtrend line and is like price behavior seen within a developing symmetrical triangle. This observation may lead to a period of choppy consolidation prior to natural gas breaking out to the upside if it is to do so.

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