Natural gas continued to hold above support around the 200-Day MA on Tuesday, now at 2.24. During the session it managed to eke out a small advance above yesterday’s high to 2.375, a three-day high before encountering resistance. That followed an earlier pullback to 2.27, the low for the day. So, there is now a higher daily high and higher daily low for natural gas, further indicating that a bullish reversal may be possible from the 200-Day line. A daily close above yesterday’s high of 2.37 will provide an additional sign of strength.

A graph of stock market Description automatically generated with medium confidence

Breakout Above 50-Day Moving Average Needed

Potential resistance around the 50-Day MA lurks just above today’s high at 2.40. It can be considered along with the interim swing high of 2.44, thereby generating a potential resistance zone from 2.40 to 2.44. Once the 50-Day line is exceeded to the upside, natural gas will have a chance of continuing to rally. In general, Fibonacci ratio analysis considers the 38.2% retracement as a minimum normal retracement. Natural gas reaches its minimum 38.2% retracement target at 2.52.

Correction of 26.8% May be the End

Monday’s low of 2.21 completed a 0.81 point or 26.8% correction from the 3.02 swing high reached in early-October. During the decline, the 61.8% retracement at 2.31 was broken to the downside before support was seen from the 2.21 low, a little shy of a 78.6% retracement at 2.12. Given the sharp drop and signs of support at a potentially significant support zone, it looks like there is a real possibility of a bottom. However, further signs of strength are needed, starting with a clear bullish reversal.

Decisive Breakout Above 2.375 Needed

A more decisive bullish breakout than seen today is needed next with a rally above today’s high of 2.375, followed by a daily close above the high. Subsequently, upward momentum should improve at that point if the reversal takes hold. Yet, yesterday’s wide range day may lead to further backing and filling before the ascent kicks in. Until there is a daily close above today’s high the potential for lower prices and possibly a continuation of the downtrend remains. If the 2.21 fails to retain support, the 78.6% retracement at 2.12 becomes the next lower target.

For a look at all of today’s economic events, check out our economic calendar.