Positive Trade in Natural Gas Doesn’t Turn It Around

Natural Gas Forecast Video for 23.02.23 by Bruce Powers

Natural gas topped out at 10.03 in August of last year. Since then, it has fallen as much as 80.4% as of today’s low of 1.97. A target price around 2.03 was reached today before an intraday reversal kicked in. The target is derived from prior price action over a four-month period. Depending on where the close is natural gas is on track to have its best day since the most recent peak in mid-December.

Downtrend Remains

Nevertheless, the downtrend remains intact as price could not exceed the prior day’s high by more than a cent. A daily close above today’s high of 2.30 is needed next for a bullish signal. Otherwise, we can expect the trend to continue or natural gas moves into consolidation. If it keeps falling it heads into a large range of potential support down to the next identified support zone around 1.77.

That target price is the completion of a measured move off the August 2022 top. However, rather than the second leg down (2) being equal to the first leg (1), the target is the 127.2% Fibonacci extension of the first leg down.

Minor Bullish Divergence

The first signs of a minor bullish divergence between price and the 14-Day RSI occurred today as it turned back up above oversold of 30. A trendline illustrates the divergence. This is still early but deserves to be watch to see if the divergence becomes more pronounced and therefore more reliable.

Trend Indicator Retained

Notice that the 12-Day EMA (orange) has done a good job as a trend indicator particularly since it was tested as resistance multiple time recently and it held. Therefore, a daily close above the 12-Day EMA will provide a solid bullish signal. Until then we’ll have to watch for more aggressive short-term signs for a reversal.

Upside Targets

Once a reversal triggers however, there is plenty of upside. The most obvious upside target being 3.54. That’s the swing low from December 2021. That level is followed by the 38.2% Fibonacci retracement at 4.12. Subsequently, the 50% retracement is at 4.78 and it corresponds with price structure from a swing low in October of last year.

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