Natural Gas Showing Early Signs It Wants to Go Higher

Natural Gas Forecast Video for 24.01.23 by Bruce Powers

Natural gas remains in a clear downtrend but there are several signs indicating it may be getting closer to a bullish reversal off a bottom. A trend low of 3.09 was hit last Friday, which completed a 56.5% decline off the last swing high of 7.10 from December 13. That decline took place in only 25 trading days. Such a rapid descent could be hit by similar enthusiasm to the upside once a bull reversal kicks in.

Support Zone Reached

A potential support area is identified from several Fibonacci measurements on the chart around the current trend low. It remains to be seen whether that support area will continue to hold and eventually reject price to the upside. The clearest signal so far is in the 14-Day RSI, where the green moving average line crossed up providing an early signal for a reversal on the RSI, reflecting a shift in momentum.

That shift can also be seen within recent price structure as a declining relatively narrow parallel channel has formed. You can see how the descent has slowed, like what we might see in a descending wedge. At the same time, the 12-Day EMA is just about the meet price for the first time since mid-December. Why is that important?

Watch for Moving Average Breakout

Regardless of what technical analysis says about what might happen in the future, we still need a clear signal telling us a reversal may be in the works. With price at or near the 12-Day line, we can use that line for a bullish signal. Currently, the line is at 3.64. If price rallies above it and stays above it, that is one reversal signal. We then continue to watch for further evidence of strengthening.

That 12-Day EMA signal can be strengthened when including the January 18 high of 3.64. Taking that high into account along with the moving average would therefore signal a breakout of both the moving average and a breakout to a five-day high. Essentially, a more significant reversal than if there is only one signal. One other thing of note. A breakout above the 12-Day line will also trigger a breakout of the descending wedge.

Upside Targets

If a bullish reversal does occur and natural gas rallies the first target is the prior support swing low of 4.75, along with the 38.2% Fibonacci retracement at 4.81. Together, the create a first target zone from around 4.75 to 4.81.

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