Failed Pattern Dynamics Raise Upside Volatility
Failed patterns can lead to sharp swings in the opposite direction. For natural gas that would be to the upside. The positive outside day near key support suggests the possibility of a bullish reversal from this support zone. Moreover, it strengthens the significance of the support zone and therefore a failure of support could see a sharp market reaction. The double bottom pattern remains a risk but only if triggered. Also, the pattern will start to lose its integrity with an advance above Wednesday’s high of $3.25.
Resistance Cluster Limits Upside Scope
Key upside resistance is near the recent trend high of $3.40, along with the 200-day moving average around $3.43. There is a higher target derived from a recent falling wedge pattern near $3.49. So, if the 200-day average is reclaimed, that level becomes a possibility of being tested as resistance.
Nevertheless, the current advance reached potential targets that could result in a completion of the rally. Even if there is further upside, it is probably limited, as things look now. The 200-day moving average presents long-term resistance and unless a sustained reclaim of that average occurs, the potential for downward pressure dominates.
