Natural Gas Turns Up to Reach a Three-Day High and Pointing Higher
Natural Gas Forecast Video for 08.02.23 by Bruce Powers
Natural gas shows early signs of coming off the bottom. Whether it can pick up steam and lead to a sustainable rally remains to be seen.
On Tuesday natural gas managed to reach a four-day high. The 14-Day RSI has turned up from extreme oversold conditions, the most oversold on a daily basis in about eight years. It remains in oversold territory at 29.51 however, as a reading below 30 is oversold.
Has a Bottom Been Reached?
A correction low of 2.34 in natural gas was reached several days ago. That is 76.7% below the 10.03 peak hit almost six months ago. Natural gas completed both an 88.6% Fibonacci retracement and the 100% target for a falling measured move around the low, at 2.42 and 2.33, respectively. In other words, it is now bouncing off a logical support zone that could lead to a bottom. Further signs of strengthening though are needed for indications that a minor bounce can turn into a tradeable rally.
Trading Inside Week
The key price level to watch now is last week’s high of 2.78. So far this week natural gas is trading inside week, and it may stay inside all week. That would setup a potential upside breakout bullish reversal of an inside week for next week, a form of consolidation. Nevertheless, a move above 2.78 is bullish whether it happens this week or next.
Intraday Patterns
This next chart is a 4-hour chart that provides a close up of recent price action. Here you can see the bullish reversal progressing in greater detail. Note that price moved above the 34-period EMA for the first time in a week, a sign of strength. Also, the 50% retracement of the short swing is at 2.97, close to the minor downtrend line.
Once the weekly high is busted to the upside the primary target becomes the prior swing high around 3.54, marked by a brown dashed line on the chart. That’s also close to the 34-Day EMA, which is now at 3.67. Support is first at Tuesday’s 2.42 low, followed by Monday’s low at 2.36.
Keep a close eye on natural gas in the near-term given the above early signs that it may be turning bullish. A minimum rally based just on Fibonacci ratio analysis could see natural gas eventually reach the 4.14 price level, which completes a 38.2% retracement.
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