Lower High Structure Signals Downtrend Formation
A second lower swing high was generated on Wednesday, which is now part of the downtrend price structure of lower swing highs and lower swing lows. Friday generated a second lower low that followed the May peak of $3.40. Depending on how it is measured, natural gas is currently in either its second leg down from that peak or the third. Nevertheless, a short-term bearish trend has clearly begun to take shape.
Downside Targets and Key Support Zone
Given recent bearish signals and signs of weakening, and consistent with the continuation of downside pressure outlined above, natural gas looks likely to continue lower towards the next potential support zone. It starts with the 50-day moving average at $2.89 and goes down to the 61.8% Fibonacci retracement of the prior advance at $2.84. Within that price zone is a higher swing low at $2.86 from May, which remains an important structural support level within the broader bullish framework. It is part of the bullish structure and a drop below it would signal a reversal of the uptrend and a failure of support at the 50-day moving average.
Reversal Conditions and Short-Term Resistance Levels
Short-term strength is indicated above Friday’s high of $3.14, although the lower swing high of $3.25 would need to be recovered before there is a clear bullish reversal signal.
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