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Natural Gas Rallies off Strong Support, Yet Lower Target Remains
By: Bruce Powers | July 8, 2024

• Natural gas saw support at 2.27, sparking a rally, but faces potential resistance at the 200-Day MA, currently at 2.47.

Following a decline to a new retracement low of 2.27 earlier during Monday’s trading session, natural gas subsequently showed signs of support and the potential for a bullish reversal day. Once support was seen from the 2.27 retracement low, a rally followed setting up a potential wide range green candle for the day.

At the time of this writing, trading continues near the highs of the day. Until there is a rally above a prior day’s high, the downtrend remains as there remains a series of lower daily highs and lower daily lows. Friday’s high was at 2.44. Following today’s close, the high for today, currently at 2.39, will be the near-term price level to watch for signs of strength.



Downward Pressure Remains

Moreover, since the downtrend price structure remains, a decline to test the next lower support zone is still a possibility. Keep in mind that rallies will be heading up into potential resistance around the 200-Day MA, currently at 2.47. Since it is a long-term moving average and the price of natural gas continued to fall after an initial decline below the line last Tuesday, it can be expected to mark an area where resistance may be encountered on the way up.

Lower Price Zone Begins at 2.23

The next lower support zone looks to be around 2.23 to 2.17. It begins with a prior swing low from December and a resistance level from early-February. A 61.8% Fibonacci retracement completes within the price zone at 2.18, while an extended falling ABCD pattern completes at 2.20. In summary, there are four indicators pointing to the 2.23 to 2.17 price zone as potential support.

Further, on the weekly chart, the 20-Week MA shows within the price zone at 2.20. The 2.17 price level is shown to have a harmonic relationship with the price drop seen in the first AB leg of the decline. Rather than the AB and CD legs of the decline being equal, a Fibonacci ratio of 127.2% is applied to the price distance seen in the AB leg and that amount is subtracted from the beginning of the CD decline.

When more than normal indicators point to a price range, the market is telling us to pay attention. Therefore, natural gas may rally further from today’s low, but it is heading into potential resistance. If resistance is strong enough it may turn the price of natural gas back down for a potential test of support beginning from the 2.23 price area.

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