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Natural Gas Rallies to New Highs After Early Session Dip
By: Bruce Powers | May 22, 2024

• Following an early dip, natural gas rallied to 2.85, suggesting continued strength with key resistance ahead.

Natural gas stays strong to reach a new trend high of 2.85 on Wednesday. Earlier in the session the price of natural gas broke below the lows of the past couple days before buyers took control to rally into new trend highs. An outside day is the result.

Trading remains active near the highs of the day and will likely end today’s session with a new daily closing high for the current rally. A daily close above the prior trend high of 2.80 will be a slightly stronger indication of strength than a close below it.



False Breakdown Followed by Sharp Intraday Advance

Given the failure of the breakdown earlier in today’s session and the following strong recovery, it looks like natural gas wants to go higher. The next higher identified target zone is close by from around 2.86 to 2.88. Also, keep an eye on the top declining blue dashed trend channel line as resistance can be seen around that line. Further, if a daily close occurs above the line, it will be a sign of strength. Highter up is the 78.6% Fibonacci retracement at 2.99.

Price is Extended Yet Continues to Rise

Certainly, natural gas is getting extended as well. The relative strength index (RSI) is the most overbought since the 2022 peak. Considering the size of the current advance, this rally has exceeded all prior sharp advances since the first trend bottom in 2023 on a percentage basis. That is when starting the measurement from the most recent swing low (C). In this case, from (C) the current rally was up by as much as 80.1% at today’s high.

However, the full advance from the second trend bottom in April 2023 to the October 2023 peak was 87.2%. That performance will be matched in the current rally at 2.96 thereby providing another measured move target (purple arrows). It is interesting that this target is very close to the 2.99 Fibonacci retracement level. It is also close to several measured moves that occurred in natural gas during the uptrend that began from the 2020 bottoms.

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