Since February 12, April natural gas had risen in a choppy upward sloping range that formed a bearish flag. However, prices broke higher out of the flag today and settled above the pattern’s upper trend line. The flag’s failure to break lower is bullish for the near-term and calls for a larger upward correction before the move down ultimately continues.
The next objective is $2.80, which is the 100-day moving average and a confluent projection for the multitude of waves and sub-waves that formed the flag. A close above this would call for $2.83 and possibly $2.87.
The $2.83 target is a potential stalling point because it is in line with the 62 percent retracement of the decline from $2.983 and the 200-day moving average. If the move up is going to remain a “normal” correction, $2.83 should hold.
Key resistance is $2.87. This is the smaller than (0.618) target for April natural gas’ wave $2.487 – 2.983 – 2.565. Waves that meet the smaller than target typically extend to the equal to (1.00) target, in this case, $3.06. Therefore, should April settle above $2.87 look for prices to rise above $3.00 again.
All of that said, the long-term outlook for natural gas remains negative, and even a move above $2.87 will do little to dampen that. For now, though, support at $2.70 should hold and key support is $2.65. These are the 38 and 62 percent retracements of the move up from $2.565, so far. A close below $2.65 would shift near-term odds back in favor of a continued decline to challenge major support in the low $2.50’s.
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