Prices Reverse 20% as Broader Bearish Bias Holds

Natural Gas, Strongest Weekly Rally Since Mid-July – Technical Update:

• Natural gas prices teased traders, sinking almost 20% after solid gains
• Broader technical directional bias seems to remain pointedly bearish
• Keep a close eye on a Falling Wedge chart formation on the 4-hour

Weekly Chart – Worst 5-Day Performance Since December

Natural gas prices sank almost 20% last week, marking the worst 5-day period since December. This followed a couple of weeks of upside price action that was quickly reversed. Having said that, the commodity needs to make further downside progress to technically argue that prices are readying to extend the dominant downtrend. The breakout under a bearish Head & Shoulders chart formation at the end of 2022 remains in play. Down the road, that could guide prices down to lows from 2020, making for a key range of support between 1.44 and 1.612.

Chart Created Using TradingView

Daily Chart – Prices Aiming for a Retest of the February Low?

Taking a look at the daily chart, natural gas closed at the lowest since February 23 at the end of last week. Prices were unable to test the 50-day Simple Moving Average (SMA), which continues to offer a downside technical bias and key resistance point. Now, prices are facing the February low at 1.967. Around this price is a key area of support that has been in play since last month. As such, the near-term view seems to be neutral. Clearing support would open the door to extending the dominant downtrend. Otherwise, turning higher places the focus on the 23.6% Fibonacci retracement level at 3.2973.

Chart Created Using TradingView

4-Hour Chart – Falling Wedge in Focus

Zooming in further on the 4-hour chart can give us a better picture of what we could expect specifically in the week ahead. A breakout under a bearish Rising Wedge from early March remains in play, offering a very short-term downward bias. But, there is a caveat.

Since the beginning of this month, a bullish Falling Wedge chart formation has been brewing. It seems that very soon, we will see a breakout occur. An upside push through the ceiling could open the door to a turn higher toward the early March high at 3.027. But, keep a close eye on the 100-period SMA. Prices confirmed a breakout under the latter, opening the door to downtrend resumption.

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX