Selling Pressure Persists in Natural Gas with No Letup

Natural Gas Forecast Video for 07.02.23 by Bruce Powers

For the past 34 days or so natural gas has been in a relentless decline, falling as much as 68.9% from the late-November swing high of 7.60, and down 76.7% off the August 2022 swing high of 10.03. This is a big correction from a high. Nevertheless, when looking at historical corrections for natural gas, not so unusual.

Major Corrections in Natural Gas

For over 20 years, since December 2000, natural gas has had eight major corrections. Including the current, each fell from 63.11% to 82.41%. The current correction is sitting within a possible monthly support zone, at an 88.6% Fibonacci retracement level, and at the completion of a large, measured move chart pattern. Trend low remains at last week’s low of 2.34, as Monday is trading inside day, at least so far.

A monthly support zone is determined from prior monthly lows in late 2020 and early 2021. The range is from around 2.42 to 2.24. Also at that high is the 88.6% retracement level at 2.42. And the measured move, starting from the August high matches 100% at 2.33. The measured move is looking for the second leg down (2) off the top to match the price depreciation of the first leg down (1).

Signs of the Bull

Certainly, we seem to be getting closer to a reversal, just by the fact that oversold conditions are reaching extremes, a major support zone has been reached, and there has been no more than a two-day counter-trend rally for thirty-three days. Nevertheless, the bears remain in charge and there are no bullish signs just yet.

Based on the 14-Day RSI natural gas is very oversold at 24.45. That is just below February 21, 2017, when it reached 24.46, but still above 21.71, clipped in December 2015

A break above Friday’s high of 2.52 will provide early signs of strengthening but not enough for conviction. For that, we need to see a rally and then a daily close above last week’s high of 2.78. Nearby, is the 12-Day EMA trend indicator around 2.81. A daily close above the 12-Day line should start to change the character of trading in natural gas in the near-term.

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