Natural gas is holding its trendline and 20-day moving average while volatility tightens, leaving price coiled beneath resistance near $3.40 and the 200-day moving average. A Friday reversal reclaimed trend support, but a double inside week on the weekly chart points to a larger potential response once a breakout occurs, either up or down.
Natural gas has reclaimed its trendline and 20-day moving average after a one-day bullish reversal on Friday, a shortened session because of a U.S. holiday. The reversal triggered above Thursday's high and recovered both trend indicators, pointing to persistent support and the potential for continued near-term strength.
Volatility tightens beneath $3.40
Volatility has been falling over the past couple of weeks as the trading range compresses. The reversal and recovery of the trend indicators suggest a possible retest of the recent resistance zone. Although the current high of that zone sits at $3.40, an extension to the 200-day moving average also looks possible, given its long-term significance and its alignment with prior resistance near the same area.
The levels that define the next test
The interim swing high of $3.33 from Tuesday is the next short-term upside target, and it would need to give way before the recent lower swing high of $3.38 could be challenged. Because the resistance zone is built from a series of lower swing highs, a rally above $3.38 would change that pattern and could open further upside pressure.
A coiled weekly chart cuts both ways
Range compression also shows on the weekly chart, where this week completed a double inside week pattern. Tighter or longer compression tends to precede a larger expansion once price breaks, up or down. The larger developing bearish pattern, together with persistent resistance near recent highs, supports the potential for a broader reversal of the current advance.
However, the bearish case only holds once trendline support flips to resistance. A decisive bullish signal would begin with a sustained reclaim of the 200-day moving average, now at $3.44.
Source: FXEmpire
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