Natural Gas Reversal: Bullish Signals Amid Intraday Surges

Natural gas began Tuesday’s trading session by triggering a bearish doji shooting star candlestick pattern from Monday’s session on a drop below 2.49. However, it looks like the bearish signal is in the process of reversing. After the breakdown natural gas found support at 2.385 and rallied. It has since reclaimed the 2.49 level and continues to trade near the highs of the day at the time of this writing.

Moreover, if it closes near the high of the day it will complete a bullish hammer candle pattern. And, of significance, it has already triggered a bullish reversal of a doji hammer candle on the weekly chart. Confirmation of strength should be seen today if the close is above last week’s high of 2.54.

Bullish Intraday Reversal Signal Higher Prices

Today’s bullish intraday reversal and subsequent rally reflects a failed breakdown. Once support was found, buyers stepped in aggressively. A rally above today’s high (2.54 so far) will provide a new bullish signal, and further still on a rise above yesterday’s high of 2.60. Nevertheless, today should end with the highest daily closing price in seven days. Potential resistance is first around the 20-Day MA (purple) at 2.64. It corresponds to the shorter downtrend line. Once a daily close completes above the 20-Day line natural gas should have cleared the bottom enough to sustain a continuation higher.

Successful Test of Downtrend Line Should Lead Prices Higher

It is worth mentioning the relationship between the long-term downtrend line and the recent swing low of 2.235. The line was tested as support last week and it failed to hold as natural gas closed below the line for two days, which is a sign of weakness. However, given the swift bullish reversal off that low we can say that a successful test of support at the long-term downtrend line has been completed. Once complete, it opens the door for a continuation of the initial breakout above the line that occurred in October.

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