Selling pressure continues to dominate natural gas as it once again falls to a new trend low of 2.61. A new bearish trend continuation signal was triggered on today’s move below last week’s low of 2.75.
A breakdown from the small descending parallel trend channel triggered for the third day in a row but this time something a little different happened. The price range for Monday is completely below the lower channel line whereas part of each of the prior two days traded above the line. Even though we haven’t been seeing aggressive selloffs, this behavior shows price still deteriorating.
Heads Into Very Oversold Territory
In addition, the 14-Day RSI has fallen into oversold territory with a reading of 27.34. This is now the lowest RSI level for the current leg down and the second lowest level since January 2020. It means we may be closer to a bottom but no signs of it yet in the RSI as it can remains oversold and can get more oversold.
Heading Towards Monthly Support Zone
The next support zone of note is from a seven-month shelf that was tested multiple times in the last quarter of 2020 and first quarter 2021. It consists of monthly price levels and looks to be from around 2.53 to 2.24. An 88.6% Fibonacci retracement completes within that zone at 2.42. That is the maximum retracement within Fibonacci ratio analysis anticipated before the primary trend can exert itself again. It sure looks like a real possibility that natural gas could reach the 88.6% retracement.
A drop below the 88.6% retracement at 2.42, puts natural gas at greater risk of falling further into the price zone noted above.
At this point a rally would be a counter-trend rally (primary trend down) heading up into resistance of the 12-Day EMA, which is now at 3.23. It would need to be exceeded to the upside with a daily close above the 12-Day line before there is a bullish signal that could lead to a sustained rally. Once a decisive bullish reversal does come natural gas has a minimum target of 4.52, which is there a the 38.2% retracement would complete, given the current low of the trend.
For a look at all of today’s economic events, check out our economic calendar.