Bear Trend Intact: Understanding the Current Landscape of Natural Gas Trading
As seasoned traders and investors at Extreme Investor Network, we recognize the importance of staying ahead of market trends, especially in volatile environments like the energy sector. Natural gas has been under significant pressure recently, illustrating classic bearish indicators that savvy investors must pay attention to. Let’s break down the current landscape.
A Deeper Look at the Bearish Trend
The natural gas market has shown a solid bearish correction following a lower swing high of $4.25 recorded on March 3. After peaking at $4.90, the price faced decisive rejection at the upper extremes of its trading channel, leading to a descent below the critical 50-Day Moving Average. Moreover, the price trajectory moved below the midline of the descending trend channel, marked in red on our charts, indicating increased selling pressure.
In technical analysis, the importance of channel lines cannot be overstated. The original range, marked by the blue trendlines, recently added a 25% extension highlighted with a green boundary. This additional line provides an extended lower target to keep in mind while navigating bearish momentum.
In the past few days, natural gas tested the lower blue channel line as resistance, signifying that previous support has flipped, potentially ushering in a continuation of the downtrend. The bearish signals remain clear and dominant in this market climate.
Sitting on Potential Reversal Zone
However, all hope isn’t lost for bullish investors. A critical development is unfolding: natural gas is approaching a potential support zone. This zone is near the 88.6% Fibonacci retracement level at around $3.21, which has acted as a resilient support area for several trading days. This past Thursday saw a dip to $3.19, yet the level held firmly, suggesting that buying interest may resurrect from these depths.
Despite the previous trend of lower daily lows, the lower end of the descending channel seems to cradle this support. In technical terms, Thursday’s trading session presented an "outside day," where a new lower high was established only to be followed by a rally that surpassed the high of the previous day. This action could signal a possible reversal, but traders must tread carefully and pay attention to the indicators.
Strength Signaled Above $3.33
Investors should closely monitor the $3.33 threshold. A breakout above this price point could trigger a bullish reversal and, indeed, a rapid ascension. The immediate target to watch would be the recent interim lower swing high established earlier in the week. A breakthrough could lead us up to the 20-Day Moving Average, now pegged at $3.73, followed by another lower swing high found at $3.83.
As prices push further, the 50-Day Moving Average at $3.90 may present resistance and should be taken into account for potential pullbacks as the market attempts to regain bullish momentum.
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