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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Natural gas price rally faces obstacles: fading momentum and a rising wedge

Natural gas prices have been rising lately; daily chart shows there is still some indecision as prices climb and four-hour chart reveals upside momentum is fading, eyes on wedge.

Source: Bloomberg

Hanging man in focus

Natural gas prices are heading for a two-week gain of 7.81 percent. If confirmed, that would be the best performance since the end of October. Is recent price action showing more signals that the heating element has bottomed?

Traders with a longer time horizon would likely continue seeing the broader trend as bearish. At the end of the day, there is a long-term falling trendline from August that is maintaining the downside bias – the red line on the daily chart below. Getting to that line will take considerable upside progress. Still, that does not mean that the near-term bias is shifting bullish.

Prices have confirmed a breakout above the 20-day Simple Moving Average (SMA). That is increasingly shifting the immediate outlook to a more bullish setting. Still, on Tuesday, prices left behind a Hanging Man candlestick pattern. The latter is a sign of indecision. Downside progress thereafter could be a sign that prices are ready to resume lower.

Natural gas daily chart

Source: TradingView

Upside momentum fading within a rising wedge

Zooming in on the four-hour timeframe, natural gas has confirmed the highest close since late January. Prices also took out the former ceiling of a rectangle that was established earlier this month. That price level was 2.657. Immediate resistance is now the midpoint of the Fibonacci retracement at 2.782. Confirming a breakout above that price would open the door to extending higher.

Still, a bearish Rising Wedge continues brewing. While prices remain inside the boundaries of the chart formation, the immediate bias might remain tilted higher. However, negative RSI divergence shows that upside momentum is fading. That can at times precede a turn lower. If that translates into a breakout under the wedge, natural gas could find itself resuming the broader downtrend once more.

Natural gas four-hour chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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