Volatility Spikes as Natural Gas Faces Critical Support Levels

Natural Gas Forecast Video for 16.08.23 by Bruce Powers

The price correction in natural gas continues as a bear trend continuation signal occurs on a drop below the previous swing low of 2.70. Volatility increased as natural gas is set to close with a wide range red bearish key reversal day. Earlier in the session natural gas traded above yesterday’s high and triggered a bullish signal.

Yet, as we head into the last part of the day it has declined to below the last swing low, below the downtrend line (support two days ago), below the 21-Day EMA, and to a six-day low. At the time of this writing, natural gas is sitting at resistance of the 61.8% Fibonacci retracement (2.67), which it broke below earlier in the day.

Volatility Rises with Red Bearish Key Reversal Day

Price action today is like what was seen last Thursday when another wide range red candle occurred off the top. It shows aggressive selling. In the interim an inside day followed that shows a day of rest. Further, and significantly, natural gas failed to hold above support represented by the 100-Day EMA (purple). Given the aggressive nature of selling today it seems likely that natural gas is prepared to pull back more aggressively than has been seen so far.

Uptrend Line Critical

Since the 61.8% Fibonacci level has been breached, the next obvious lower target is the 78.6% retracement at 2.58. Given that the uptrend line has three hits, it is clear potential support. Signs of support should occur before natural gas drops below the line. It would be considered the maximum retracement since a move below it may turn gas from underlying bullish to bearish.

Falling ABCD Pattern Completes at 2.55

If the 2.58 level is breached the next lower target becomes the completion of an ABCD pattern at 2.55. That target is shown at D, and it is above the uptrend line. Once 2.55 is reached the two recent swings in natural gas will match. It would reflect symmetry between the two declines and points to a possible area for a bullish reversal. In summary, a deeper retracement is normal after a sharp five-day advance of 22.8%.

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