Natural gas price action setup: is this it?
Chance of a consolidation/minor rebound in natural gas; while the broader slide appears stretched, the any rebound/upside could be capped for now and what is the outlook and what are the signposts to watch?
The sharp rebound in natural gas in recent days is a sign that bears are getting exhausted. However, it may be premature to assume that the worst is over.
Natural gas fell to a 2.5-year low last week before rebounding 35% over four sessions, raising the prospect that the fall below immediate support at the early-February low of 2.50 was a false break. Given deeply oversold conditions on higher timeframe charts, a short-term consolidation/ minor gains may have started.
The quick turnaround to crack the support-turned-resistance at 2.50 confirms that the downward pressure is beginning to fade for now. Natural gas is now testing crucial resistance at the mid-February high of 2.65. A decisive break above would confirm that the immediate bearish pressure had faded. Subsequent resistance is at the late-January high of 3.60.
Natural gas 240-minute chart
Despite how stretched the downtrend is in terms of the extent and the pace of the fall since late 2022, the jump in recent days could at best be a dead cat bounce. That is, a retest of last week’s low can’t be ruled out. That’s because the damage in recent months could take time to unwind – absent of a ‘V’-shaped rebound, it could turn out to be a prolonged base-building pattern.
However, as highlighted in the previous update, it can’t be denied that slide could be in its advanced stages, especially as natural gas last week nearly hit the strong support at the 2020 low of around 1.45, also the target of a major double-top pattern (the 2022 highs) triggered at the end of last year.
Natural gas daily chart
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
