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Minor Pullback is a Sign of Strength
Since the August swing low of 1.875, natural gas has been on a steady upward trajectory, with a minor pullback to 2.125. This pullback completed a 38.2% Fibonacci retracement before reversing higher. What does this mean? Finding support after a relatively minor pullback is actually a sign of strength in the market. The recent bullish continuation above the interim swing high of 2.30 confirms that the second leg up is underway. Additionally, a double bottom bullish reversal pattern has been triggered, with the neckline at the 2.30 swing high, indicating a potential continuation higher.
Second Leg Up off August Low Targets 2.54
Looking at the technical analysis, a rising ABCD pattern is in play with an initial target of 2.54. This level could act as a pivot point as there is symmetry in price between the two swings in the pattern. The 50% retracement level is near the target at 2.52. The crossing of the 20-Day MA above the 50-Day MA further strengthens the trend. While natural gas may not shoot straight to higher targets, the potential for further upside is certainly there.
Weekly Breakout Confirmed Above 2.29
In the near term, a weekly breakout has been confirmed with the move above 2.30. A weekly close above 2.29 will solidify this breakout on the weekly time frame, indicating that buyers are in control. Notably, a close above 2.29 will mark the highest weekly close in nine weeks. It is possible that natural gas may experience a short rest before continuing its upward trajectory off the August bottom.
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