FX.co ★ XEvils-Ash | Natural Gas (NG)

Natural gas saw a one-day bullish turnaround on Wednesday, breaking above Tuesday's range to hit a high of $2.94. A daily close above Tuesday's high of $2.93 will validate the breakout. Over the past several days, support has been tested close to the retracement low of $2.85, which was set on Monday at the intersection of a swing low of $2.86 and the 61.8% Fibonacci retracement of the prior rise at $2.84. A countertrend rebound to test resistance zones appears plausible before the next risk of further downside, given the confirmation of support and Wednesday's indication of growing momentum. However, the $2.85 low continues to provide important support. With an increase above the three-day high of $2.95, more proof of strength is now required. That would confirm a move off the bottom and provide another daily reversal indication. Natural gas is expected to decline again after a test of previous support levels as resistance. This is typical bearish trend continuation behavior. However, how the price reacts as it gets closer to these previous support zones will probably determine the size and length of the countertrend rise. The previous swing low at $3.02, the 50-day moving average close to $3.09, and an intermediate swing low close to $3.12 are important levels to keep an eye out for resistance throughout an advance. The range of possible resistance, however, starts at $3.12 and goes up to the high of $3.24 last Thursday. Additionally, the 20-day moving average is still declining at $3.16. Resistance at the 50-day moving average is expected to be tested by a minimal counter-trend rally. The trend indicator's inability to provide support during the downturn increases the magnitude of the decline because it was verified as support soon after its most recent recovery in early May. The rising 50-day moving average and the declining 20-day moving average both appear to be trending toward the $3.12 price range. However, their combination would create a more substantial resistance area and raise the likelihood of a negative continuation in the future. Consequently, even while Wednesday's reversal points to a possible short-term rebound, the response in the vicinity of this resistance cluster will probably decide whether the larger negative trend continues. Natural gas (NGQ26) closed at $2.918 in August, up 5.3 cents or +1.85%. Europe, not the home market, was the source of Friday's gain. As the U.S.-Iran war increased the possibility of protracted Strait of Hormuz delays, European natural gas prices surged to a 3.75-month high. Despite the lack of support from domestic data, the international risk premium drove up U.S. futures. After long chasing, summer demand was penalized by the previous week's sharp selloff; natural gas ended the week stabilizing. The recovery on Friday appeared to be more of a reset following that washout than the start of new directional purchasing. After failing to break through the previous day's low of $2.823, August natural gas futures saw a slight increase on Friday. In the end, the market posted an inside move, which usually denotes approaching turbulence and investor hesitation. Sometimes it indicates a shift from bearish to bullish; however, I didn't observe a change in volume to support this. The market moved very little for the whole week, as if it were attempting to establish a base of support. That's conceivable, but the increase was probably more related to a recovery from the sharp sell-off the previous week, which seriously hurt the speculative longs hoping for a summer rally. Regaining the previous low at $2.974 may provide some stability on the upside. The short-term retracement level at $3.089 may become apparent if this generates sufficient upward momentum. If this is overcome, the 50-day moving average at $3.162 might be considered an even greater goal. On the downside, the daily chart shows that there is a lot of opportunity to break if buyers begin to anticipate higher demand and hotter weather.