Natural Gas Technical Analysis and Near-Term Outlook
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February natural gas rose today, confirming daily bullish KasePO, RSI, Stochastic, and MACD divergences. These bullish momentum signals reflect exhaustion and call for a larger test of resistance before the downtrend extends and tests a highly confluent area of support between $3.30 and $3.20.
The intraday wave up from $3.324 met and held its $3.59 smaller than (0.618) target. Another test of $3.59 is expected, a move above which will call for the $3.67 equal to (1.00) target to be fulfilled. This is also the 38 percent retracement of the decline from $4.176. A simple correction will hold $3.67. Settling above $3.67 will call for an extended correction to challenge $3.77 and possibly $3.83. Settling above $3.83, which is in line with the larger than (1.618) target of the wave up from $3.324 and the 62 percent retracement from $4.176, would indicate that a substantial test of resistance is underway.
Nonetheless, the downtrend remains intact, and the top of Monday’s gap down from $3.563 held on a closing basis. The gap might still prove to be an exhaustion pattern should prices settle above the $3.59 target. Otherwise, should $3.59 hold, and prices close below $3.43, look for another attempt to take out key near-term support at $3.30. This is the smaller than (0.618) target of the first wave down from $3.324 and the intermediate (1.382) target of the first wave down from $5.551. Settling below $3.30 would put the odds in favor of testing the $3.20 equal to target of the primary wave down from $5.551. This is another probable stalling point for the February natural gas contract.
