Bullish signs after the breakout from the descending wedge

A decisive bullish breakout was triggered on Wednesday when natural gas broke out of a bullish descending wedge pattern. After the breakout, the upside momentum remained strong. Each of the last three days closed in the upper quarter of the day’s trading range. The daily swing high of 2.15 is also a weekly high from last week. This means that a weekly bullish signal was also triggered this week. So a daily close above 2.15 will also confirm the weekly reversal. It follows seven weeks after the recent swing high of 3.16.

Further rest period possible before the trend continues

Before natural gas prices continue to rise, a pullback could occur. In this case, the 20-day MA at 2.09 is the first price level to watch. It was successfully tested as support with today’s low of 2.10. Further down, the 50% retracement level is at 2.04, followed by a price zone around Thursday’s and Wednesday’s daily lows of 2.03 to 2.01, respectively. This would also be roughly the upper boundary line of the wedge pattern.

Watch for short-term weakness

The degree of the correction, if it occurs before a continuation of the uptrend, can tell us something about the underlying strength of natural gas demand. Of course, finding support at or above the 20-day line and then continuing higher would be a more bullish behavior. Still, the weekly reversal was just triggered and suggests the rally is likely to continue. What is not clear is the aggressiveness of the rally. A prolonged correction or consolidation before a continuation of the uptrend is possible. However, given the clear uptrend this week, it is also possible that the bulls will maintain control of higher price levels.

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