Natural Gas Shows Bullish Divergence with Momentum Oscillator

Bottom Consolidation Pattern

A double bottom pattern had been forming previously, but now it looks to have morphed into a triple bottom on the intraday time frame. Or we can just look at it as a bottom rectangle consolidation pattern. Either way a breakout of the pattern occurs on a decisive rally above 2.66. That move will also trigger the breakout of an inside week on a weekly time frame.

As can be seen on the 4-Hour chart, a slightly earlier signal will trigger above the most recent swing high at 2.61, which is also Monday’s high. You can see how it is already showing relative strength with the purple 55-period EMA, which has recently been recognized by price. It is important to keep in mind that an earlier entry usually has a greater chance of failure. The idea around an earlier entry is that it is good to get in a little early but only if that rally subsequently takes out higher trigger price, before any pullback of note.

Already Reached Potential Long-term Support

Natural gas has already reached a potentially significant support zone that includes prior monthly lows, over seven months. Plus, the completion of a large, measured move at 2.33, and the hit the 88.6% Fibonacci retracement at 2.42.

Update Price Levels

Once an upside breakout is confirmed by a daily close above 2.66, natural gas is cleared to go higher.

The first near-term target is the weekly high of 2.78. If the upside breakout has legs this weekly high should be taken out quickly. Natural gas will then be heading to a more significant potential resistance zone from around 3.45 to approximately 3.60.

If that zone is cleared to the upside then natural gas heads towards the next major price zone around 4.75 (prior support) to the 50% retracement area at 4.97. This doesn’t mean that natural gas goes straight there, just that eventually on a technical basis it has the potential to get there.