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New Trend High Stalled Advance
A new trend high of $4.55 was reached on Tuesday and the day ended with natural gas in a relatively weak position in the lower half of the day’s trading range. Moreover, the closing price was the second highest level for the bull trend, but it was not the highest.
That is not a convincing response to a new bull breakout as it shows short-term weakness, rather than improving strength. Then, on Wednesday a new closing daily high was established at $4.52. And Wednesday’s high of $4.52 completed another test of resistance around a top trend channel line that marked a resistance zone for the three most recent rallies.
Top Channel Line Remains Resistance
Previous attempts to break out above the channel line have failed. This would seem to put greater weight on the possibility of a bearish retracement rather than a bullish continuation. Nonetheless, the behavior of natural gas around key near-term price levels mentioned above will provide clues.
Although demand remains relatively strong given the two days of consolidation that further tested resistance around the channel line, a sustained upside breakout and a continuation of the bull trend may have greater success following a pullback first, or a longer rest in consolidation.
Bullish Weekly Price Action
On the weekly time frame natural gas showed strength this week. This week’s rally began following an initial bearish move to test support at a confluence zone that is marked by several indicators. Of significance is the 50-Day MA, now at $3.77. That line was joined by the 20-Day MA and a 50% retracement level. It was the first real test of support at the 50-Day line since it was reclaimed on February 13.
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