Understanding Natural Gas Retracement: Potential Consolidation or Continuation?

Natural Gas Forecast Video for 30.06.23 by Bruce Powers

Natural gas pulled back further from recent swing highs before finding support at the day’s low of 2.62. Support was seen off that level with Thursday on track to complete a green candle. Notice that on the second day of a retracement from the 2.88 swing high natural gas found support above the 38.2% Fibonacci retracement. That is a sign of strength. If we see a rally tomorrow to above today’s 2.75 high, it is possible that demand returns and leads to a trend continuation higher.

Prior Retracement Ended Quickly

Nonetheless, each of the prior two retracements in the near-term trend completed in two or three days. This means that by tomorrow, Friday, it could be over. Also, if there are not signs of strength showing up then a longer retracement or consolidation period is probably in the works. If a move higher comes then there are two price levels to watch for signs of strengthening. The first is the 100-Day EMA at 2.77. Natural gas closed above the line three days ago for the first time since December. Another daily close above the line would be an indication of slowly improving underlying demand. Additional daily closes above the 100-Day line would further confirm strengthening.

Price Behavior Leaves Clues

Moreover, if natural gas is to continue to advance its uptrend it needs to first get above the latest trend high at 2.88, followed by a daily close above that level. Such a move would trigger a bullish trend continuation. Although the next identified resistance zone is not much above the prior high, from around 2.97 to 3.03, it is further from current levels. As always, this is not a prediction, rather a possibility of what could happen.

Further Pullback on Drop Below 2.45

Alternatively, the retracement is not over, and natural gas moves to below today’s low of 2.62. In addition to possible support around the Fibonacci retracement levels as seen on the chart, a minor swing low and weekly low is at 2.45. That would be an important price area to watch as there have been a series of higher weekly lows in natural gas for four weeks. Also, after Friday this week’s low of 2.62 will be the closest weekly price level, defining the uptrend on a weekly chart.

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