Commodities▼ Bearish
Natural Gas Holds $2.85 Support, Awaiting Breakout Direction
The commodity has held above $2.85 for three days, a level defined by a prior swing low and the 61.8% retracement. A break below targets $2.69, while a move above $2.93 could signal a reversal.
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Natural gas held above $2.85 on Tuesday, extending a three-day test of a support zone that technical analysts see as a key level for the next directional move. The session formed an inside day, with the price contained within Monday's range. The low of $2.85 matched the previous day's low, marking the third day the commodity has tested the zone between $2.86 and $2.85.
The zone is defined by a prior swing low and the 61.8% Fibonacci retracement of the advance that followed April's low, according to Bruce, a CMT charter holder and head of trading strategy. The inside day pattern on Tuesday offers an early signal of potential strength. A decisive break above Monday's high of $2.93 would create a one-day reversal and suggest buyers are stepping in, he said.
If the support holds, the first upside targets are the prior swing low at $3.02 and an interim swing low at $3.12. Above that, the 50-day moving average at $3.08 and the 20-day moving average at $3.17 are the next resistance levels. The 50-day moving average is particularly important because it was broken last week, and the pullback to retest it as resistance confirmed the bearish trend, Bruce noted.