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A bull breakout of a descending wedge trend continuation pattern triggered last Thursday and led to a rally into resistance at Monday\u2019s high of $4.25. The current pullback is typical following a breakout as prior resistance areas are tested as support. Once support is found there is the potential for another advance. The weekly chart is also supportive of such a scenario.<\/p>\n
On Monday a bullish weekly reversal triggered above last week\u2019s high of $4.10, following a two-week pullback. Although it quickly failed there is the potential for this week to end with a higher weekly high and higher weekly low. Therefore, traders and investors will likely be watching the current bearish pullback for signs of support that may lead to a bullish reversal.<\/p>\n
Notice that the 50-Day MA was clearly a support area during the early-March swing low. During the recent correction it was undercut for a couple days and then reclaimed relatively quickly. Therefore, during this decline natural gas could dip below the 50-Day line briefly but should recover quickly. If it does not and there is a daily close below the moving average, then the risk of further downside increases.<\/p>\n
Since the higher trendline support was broken mid-March, there is the possibility of eventually testing the next lower trendline before a bearish correction is complete. Since the line is rising it will represent a price above the recent corrective low of $3.73 around April 14 (vertical). Given the overall pattern and potential support around the 50-Day line, there is the possibility of seeing consolidation until then between the recent low and this week\u2019s high.<\/p>\n
The next lower trendline has three points thereby marking it as a solid line. Therefore, it should act as support the first time it is approached, or a break below could lead to a sharp drop given the potential significance of the trendline.<\/p>\n