As Natural Gas Faces Critical Support Levels, Volatility Increases

A break below the previous swing low of 2.70 will trigger a signal for the continuation of the bearish trend, meaning that the correction in natural gas will continue. Natural gas is expected to close with a broad red bearish decisive reversal day, which increases volatility. Natural gas traded above yesterday’s high early in the session, which was a bullish sign.

However, during the course of the day, it fell below the previous swing low, the downtrend line (which acted as support two days ago), the 21-day EMA, and to a six-day low. Natural gas is currently trading at resistance at the 61.8% Fibonacci retracement (2.67), which it broke below earlier in the day.

Volatility Increases with Red Bearish Key Reversal Day

Today’s price movement resembles that of last Thursday, when another wide range red candle appeared off the top. It displays hard selling. In the interval, an inside day that represents a day of calm followed. Furthermore, natural gas also failed to hold above the 100-Day EMA (purple) support level. It appears likely that natural gas is set to pull back more violently than has been witnessed so far, given the aggressiveness of selling today.

Critical Uptrend Line

With the 61.8% Fibonacci line breached, the 78.6% retracement at 2.58 is the next logical downside target. The uptrend line has been breached three times, indicating potential support. There should be signs of support before natural gas breaks below the line. As a break below it could turn the underlying bullish trend into a bearish one, it would be considered the maximum retracement.

ABCD Falling Pattern finishes at 2.55

The completion of an ABCD pattern at 2.55 becomes the next lower target if the 2.58 level is breached. The target is above the uptrend line and is marked D. The two recent swings in natural gas will coincide once 2.55 is reached. This would reflect the symmetry between the two losses and also indicate a potential area for a bullish reversal. In conclusion, a deeper retracement is expected after the rapid 22.8% five-day rise.