Navigating Natural Gas: Reversal at 20-Day MA Fuels Positive Market Sentiment

Natural Gas Forecast Video for 18.01.24 by Bruce Powers

Natural gas falls to a new retracement low before finding support at the 20-Day MA (purple). The low of the day was at 2.76 and it led to improved demand and a bullish reversal higher. Strength returned as the subsequent rally recaptured the 50-Day MA (orange), which was busted earlier in the session. That’s a one-day reversal relative to the 50-Day line.

The 50-Day line is at a price of 2.80. Demand stepping up near the lows 20-Day line was supported by the volume weighted average price (light blue) as it pointed to a similar price level. In addition, a 141.4 Fibonacci extension was completed there as well. It comes from an extended falling ABCD pattern.

Possibly More Upside to Go

Price behavior is telling us that today’s bullish reversal may have more upside to go. Where natural gas closes the day will be telling. A stronger closing price increases the chance for follow through in the coming days. Closing in a position of strength, generally considered to be in the top third or quarter of the day’s range, shows buyers being able to maintain control till the end of the session and therefore strength may extend. Nevertheless, it requires further confirmation of strength as it may just be in reaction to Tuesday’s extended sell off as reflected in the wide range red candlestick pattern. A daily close above the 50-Day MA will also provide an additional sign of strength.

Reaction to Tuesday Volatility?

Given the volatility seen in the last few days a bounce higher to test resistance levels seems likely. Therefore, traders may use short term weakness as an opportunity to accumulate at lower prices. For upside targets, the 50% retracement is at 3.07, right around the lower uptrend line. Higher Fibonacci retracement levels become targets if the 3.07 target is exceeded and they are shown on the chart.

50-Day Moving Average Holds Clues

When watching for clues as to whether the developing rising trend is gaining strength or not, attention is brought to the relationship of recent price action to the 50-Day MA (orange). It was identified as support last year, once in October and then again in November. Subsequently, prices broke below the line until January 5. A successful test of the 50-Day MA as support would point to a strengthening of the uptrend.

For a look at all of today’s economic events, check out our economic calendar.