Bearish weekly

A daily bearish shooting star pattern was triggered today by a drop below Thursday’s low of 2.19. Thursday’s rally tested resistance around the July swing high when natural gas hit 2.27. However, it quickly encountered resistance leading to the weekly shooting star candle. This is a normal and typical pullback as the initial rally from the bottom retraces previous gains. In addition to the 20-day MA, watch for the 50% retracement zone at 2.09. If the 50% level does not hold as support, the next lower target zone appears to be around the confluence of the 61.8% Fibonacci retracement at 2.04 and the previous daily support and resistance levels.

Given the weekly pattern, a drop below this week’s low would signal a bearish reversal on the weekly time frame. However, given a strong low and bullish breakout from a falling wedge pattern (orange lines), the drop is expected to eventually resolve to the upside and the bullish trend to continue. This is likely just the beginning of a bullish trend reversal. This week’s drop is the first downturn since the low at 1.88 (A) in early August.

Normal pull after initial rally

Once the decline is complete, natural gas should begin to reach higher price levels, starting with the 200-day MA, which currently stands at 2.335. Since the next bounce would be the first test of resistance around the 200-day line, since it failed to hold as support in early July, there is a good chance that the price will be pushed lower initially. Furthermore, the 200-day line could continue to fall over the course of a decline, potentially converging around this week’s high and representing a more significant turning point.

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