Is the Bottom for Natural Gas Finally in Place?
Natural gas has recently captured the attention of investors as indicators suggest that the swing low of $2.86 may signal a bottom. This pivotal moment indicates that any dip below this level could lead to the formation of a higher swing low, representing the first pullback following Monday’s bullish reversal on a weekly time frame. Notably, the 200-Day Moving Average (MA) has been reclaimed, with a breakout confirmed by a daily close above this significant line.
Understanding Support Confluence
The bottom of the recent bearish correction found firm support at the Anchored Volume Weighted Average Price (AVWAP) level originating from the 2024 trend bottom. This adds an extra layer of validity to the support level, given that the reaction has thus far aligned with the AVWAP established during the entire uptrend.
Interestingly, there is symmetry in the recent price action: natural gas dropped by as much as 41.5% from its recent high of $4.90. This mirrors a prior correction in June 2024, which saw a decline of 40.7%. While these percentages may suggest a comparable historical pattern, it’s essential to recognize that the current advance is merely a counter-trend rally within a broader bearish downtrend.
A Critical Indicator: Daily Close Above the 20-Day Moving Average
For investors, a daily close above the 20-Day MA could confirm newfound strength in the market, heralding the potential for higher prices ahead. A decisive move above this average would suggest that buyers are re-entering the market and could signify that bullish sentiment may sustain itself.
Key potential support during dips is currently positioned around the 200-Day MA at approximately $3.09, with this week’s low resting at $3.05. As the week proceeds, keeping an eye on this low will be vital. It will serve as a crucial indicator in the evolving weekly trend, where we seek to witness higher highs and higher lows.
Monthly Outlook: A Shift in Control for Buyers
From a longer-term perspective, natural gas appears poised to finish the month above the lows observed between December and February, which were breached during the recent downturn. This closing above prior lows stands as significant evidence that buyers may be regaining control over the market.
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