Crude Oil, Natural Gas Outlook: Preparing for an Advance?

CRUDE OIL, WTI, NATURAL GAS, NG – Technical Outlook:

Crude oil continues to be weighed by stiff resistance.
Natural gas is holding above strong support.
What is the outlook and what are the key levels to watch?

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The downward pressure in crude oil and natural gas has abated somewhat recently, but both need to clear important resistance levels for the outlook to turn constructive.

Crude Oil: Bullish gap is still in place

Crude oil has retreated from stiff resistance at the 82.50-84.00 area, including the 200-day moving average and the January high. See the previous updates highlighting that the OPEC+ output cut announcement did not imply a start of a new uptrend for oil. See “Crude Oil is Still Not Out of the Woods Despite OPEC+ Output Cut”, published April 10.

Crude Oil Daily Chart

Chart Created by Manish Jaradi Using TradingView

Note: In the above colour-coded chart, Blue candles represent a Bullish phase. Red candles represent a Bearish phase. Grey candles serve as Consolidation phases (within a Bullish or a Bearish phase), but sometimes they tend to form at the end of a trend. Note: Candle colors are not predictive – they merely state what the current trend is. Indeed, the candle color can change in the next bar. False patterns can occur around the 200-period moving average, or around a support/resistance and/or in sideways/choppy market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.

Despite the retreat, the bullish gap remains in place – oil is above the lower edge of the gap. In some instances, the closing of a bullish gap negates the immediately prior bullish move, increasing the risk of a downturn in price. Also, the rise above the Ichimoku cloud on the daily charts is an encouraging sign for bulls, and the retreat so far is 38.2% of the rise in March – 38.2%-50% are considered to be reasonable retracements and not the end of a trend.

Crude Oil Daily Chart

Chart Created by Manish Jaradi Using TradingView

Granted the price action is still unfolding, but on its own, the retreat is not enough to signify that the March rebound is over. If at all, as the colour-coded charts based on trending/momentum indicators show, oil remains in a consolidation phase. A break above 82.50-84.00 is needed for the outlook to turn unambiguously bullish. Such a break would imply that the year-long downward pressure had faded, exposing the upside toward the November high of 93.75. See “Bullish Break in Crude Oil After US CPI; Can it Rise Toward $90?”, published April 13.

Natural Gas Daily Chart

Chart Created by Manish Jaradi Using TradingView

Natural Gas: Has the base building started?

Natural gas appears to have found some support at the February low of 1.97. Positive momentum divergence on the daily and weekly charts (declining price associated with higher momentum readings) indicates that the multi-month-long slide is losing momentum. Moreover, the colour-coded daily candlestick charts show the most recent leg lower (from early March) is consolidation within the downtrend, and not the start of a fresh leg lower. See the previous update for further discussion: “Natural Gas Price Setup: Downward Pressure is Abating”, published April 11.

Natural Gas Weekly Chart

Chart Created by Manish Jaradi Using TradingView

This minor rebound this month on intraday charts is an encouraging sign. Any break above the crucial resistance area around 2.25-2.40, including the 89-period moving average, the 200-period moving average, and the upper edge of the Ichimoku cloud on the 240-minute charts could open the way toward the March high of 3.03. On the downside, any break below 1.97 would expose the downside toward the 2020 low of 1.45.