Natural Gas Testing Prior Lows: Bear Trend Continuation on Deck
Natural Gas Forecast Video for 10.04.23 by Bruce Powers
Once again natural gas is testing its prior lows as it falls to a low of 1.99, which is below last week’s low. It ends the week bearish, near the low of the period. A daily close below last week’s low of 2.00 has natural gas next targeting the bear trend low of 1.97 from February 22. At that point natural gas had corrected 80.4% from its August 2022 peak of 10.03. Nevertheless, the potentially bullish weekly hammer candle from last week, discussed previously, is now negated as the low of last week was broken to the downside.
Bear Trend Continuation Triggers Below 1.97
A daily close below the 1.97 area triggers a bear trend continuation with natural gas possibly accelerating to the downside at that point. Several subsequent targets are noted on the chart with the first being a prior swing low support level at the 1.79/1.80 area. Other price areas where support could be seen include a variety of Fibonacci extensions. They are extensions of greater than 100% retracement levels of the most recent rally. That rally saw natural gas advance as much as 53.9% in only eight days. It peaked at 3,027. The 127.2% Fibonacci extension is at 1.68, followed by the 141.4% retracement at 1.53, and the 161.8% extension at 1.31.
Could Natural Gas Turn Higher?
Alternatively, a breakout above this week’s high of 2.20 provides a bullish signal. That would be the first sign of strength with any reliability. If natural gas can then close above the two-week high of 2.24 it might have a chance to continue higher. Downside moves have been muted the past couple of weeks, and the 14-Day RSI continues to show bullish divergence with price. Each of these components says to be cautious of the downside until the situation is clearer, and don’t be caught off guard if natural gas rallies instead of declines. Not a prediction, just that we want to be ready for either direction.
Initial nearby upside targets include Fibonacci retracement levels at 2.39 (38.2%), 2.51 (50%), and 2.63 (61.8%). Both the 38.2% and 61.8% retracements are strengthened by the fact that there is also a weekly high at each of those levels. Once a bullish reversal is confirmed higher targets are certainly possible and likely, with the first being the more recent swing high at 3.03.
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